When a couple is thinking about making a Lasting Power of Attorney (LPA) for their property and financial affairs, it is quite common for them to want to appoint each other as their attorneys. Often they want to appoint each other as sole attorneys initially. While they maybe happy for their children or other trusted people to act to, it is common that they only want them to act if the spouse becomes unable to. This is usually a sensible enough approach, but there is one small issue that people should be made aware of. There can be difficulties if the property needs to be sold after the owner has lost capacity.
What is the Issue?
Trusts are persuasive in English and Welsh law. While it is not something we consider in our day-to-day life, it is a fact of land law that every property that is held jointly is on a trust of land. The joint owners of the property hold the property as trustees, in most on trust for themselves, either as joint tenants or tenants in common.
Where a property is held on a trust of land, at least two trustees are required to give good receipt for any capital arising from its sale, (a complicated legal way of saying the sale proceeds). This is where we face problems with joint owners of property appointing each other as their sole attorneys. Two distinct signatures are required on the transfer documents, so an attorney cannot sign both for themselves in their capacity of a trustee, and also for their incapacitated owner in their capacity as attorney.
How is this Resolved?
The attorney will be a continuing trustee, as they are still a capable co-owner of the land. Where the attorney is a continuing trustee, The Trustee Delegation Act 1999, allows them to appoint a new trustee to act with them solely for dealing with the property transfer. Once the property is held by two capable trustees, it can be sold, as a good receipt can now be given.
So, in reality it is a minor nuisance, and easily worked around, but being faced with this issue unexpectedly as an attorney can certainly be daunting.
Traditionally a new formal Deed of appointment of new trustee is entered into, so that it remains on the file and if necessary, can be registered at the HM Land Registry, or placed with the Title Deeds for sale. If clients own their own property jointly, and wish to appoint each other as a sole attorney, it is therefore best that they are aware of this.
Of course, the easiest way to avoid this issue at all would be for them to consider naming an additional attorney to act alongside the other spouse. This way there would always be two separate trustees able to sign any transfer documents, as the joint owner could sign for themselves, and the incapacitated owners other attorney could sign on their behalf. This avoids any panic or delays when it comes to selling the property after an owner has lost capacity.
If you require help in connection with any of these matters, please do not hesitate to contact us.