If you are involved in a property transaction in Spain you will be almost invariably provided with a power of attorney to sign[^1]. And almost, just as invariably, the power of attorney will include the following 5 type of clauses:
- the attorney has the power to buy any property/goods on your behalf at the price and on what conditions the attorney wishes;
- the attorney has the power to sell any property/goods on your behalf at the price and on what conditions the attorney wishes;
- the attorney has the power to open and operate bank accounts on your behalf (sometimes the power extends to borrowing money in your name); and
- the attorney has the power to act in conflict to your best interests[^2]; and
- the attorney can delegate her/his powers to other people, who need not be lawyers.
Although there is no explicit wording, the power of attorney does not have an expiry date[^3].
A very one-sided agreement which most people would not to sign. But most people do sign just such document…
The reason why
The argument put forward by Spanish lawyers why such a dangerous document is necessary runs roughly as follows:
- for a Spanish attorney[^attorney] to do anything for a client the Spanish attorney has to have a power of attorney;
- the attorney needs to show the power of attorney to anyone or any organisation when the Spanish attorney is representing the client or doing something on behalf of the client;
- the power of attorney has to have wording as described at the top of this post so that a person/organisation to whom the attorney shows shows the power of attorney cannot say that the power of attorney does not contain wording to cover the situation for which the attorney needs to contact the person or organisation.
What is to be done with powers of attorney?
My experience trying to persuade a Spanish lawyer to agree to limit a power of attorney to, say, buy a specific property at a specific property has never met success. This is also the experience of other English notaries.
Perhaps it is possible, with a lot of effort, time and money to get a power of attorney which is limited to specific transaction (a specific property at a specific price). Nearly all clients do have the time or money for such an effort.
So what is to be done
The practical things a client should do:
- a client should check that the person to whom you are giving the power of attorney is a lawyer;
- a client should provide written instructions in addition to the power of attorney stating that:
- the power of attorney can be only used in relation to a particular property at a particular price; and
- before carrying any significant step the attorney needs to obtain the prior written approval of the client (such as entering into a contract or paying over the purchase price); and
- if at the time the power of attorney is signed the client has not found a property or not negotiated the price, the attorney will need to obtain the prior written approval to make an offer, enter into the contract, or the price to be offered, etc.
Where there is particular danger
All of the above assumes that the attorney is a Spanish lawyer. A lawyer acting properly will not normally ‘mis-use’ the extensive authority in a power of attorney. However, many clients do not hire a lawyer, but will use a “property consultant”, “property agent” etc. People who are not regulated in any way.
Giving a power of attorney with the type of powers stated at the beginning of the post is particularly dangerous. If such a person misuses his or her authority there are no effective sanctions against them if something goes wrong.[^4]
Take a simple example:
>You are selling a property in Spain and you are using an attorney who is not a lawyer. You sign a power of attorney with the type of clauses mentioned at the top of this post. The attorney could sell your property at less than the property’s real value to a friend, business partner etc. Or they could simply buy the property themselves at a lesser value.
Then subsequently re-sell the property at its true value (and thus make a profit on the difference).
This is not an argument that only lawyers should be used or only lawyers are best, but rather it just increases the danger if something does go wrong.[^5]
[^1]: Such as when client wishes to buy a house or apartment.
[^2]: For example, if a client wishes to buy a property in Spain, then with such a provision, there would be nothing stopping the attorney buying the property her/himself first and then reselling to the client, and making a profit, or entering into a commission deal with an estate agent, mortgage broker etc whereby the client pays higher amounts in commissions and fees than client needs to.
[^3]: Such as 1 year after the date the client signs it or when a transaction is completed.
[^4]: Other than legal action in the Spanish courts, which may not be an effective sanction.
[^5]: On the basis that most persons do not have a large amount of money, and working their way through the legal system is difficult enough (and expensive) in England, and is even more so where another country is involved.
[^attorney]: “Attorney” is simply the name of the person representing you.