The risks of giving power of attorney

The event often arises when we would like to sell our Spanish holiday home or freehold apartment but we are unable to be there at the time of the required notarial certification of the contract of sale because we are only there occasionally on holiday.  A common solution in such cases is to authorise someone to represent us in the notarial proceedings.

InSpain, the transfer of a property only becomes valid once the person giving the authorisation has notarially submitted a letter of attorney.

Simple handwritten authorisation is not sufficient as there must be a notarial letter of attorney for such transfers, i.e. one prepared by a notary to make it legally valid and enable it to be entered in the land register.

This letter of attorney must be signed in the presence of a notary to allow them at that moment to verify our identity and legal status in their capacity as a representative of the state.  They are also obliged to inform us of the risks of giving power of attorney.

This formality is a guarantee for the person granting power of attorney, but it can also pose a risk because the document being officially issued by the notary is really a key with which the authorised person can do anything which is written in it when exercising the power of attorney.  Later, with the letter of attorney in their hand, they can act without the knowledge of the person giving the power of attorney, or even against their will, because the validity of the letter of attorney does not depend on the actual wishes of the person giving power of attorney, but on the officially declared wording of the certified wishes which is contained exclusively in the notarial declaration of authorisation.  This gives the third party, who is conducting business with the authorised person in good faith, the guarantee and security that the transactions are as far as possible valid, irrespective of what the person giving the authorisation might think, and Spanish law therefore does not provide any opportunity to restrict authorisation in the internal relationship, provided the letter of attorney is not notarially revoked.  It is therefore recommended that power of attorney should only be given for the benefit of a person we completely trust or that the authorised person is preferably a lawyer whose area of expertise is continually monitored by a relevant authority, such as the Colegio de Abogados (Bar Association).

It is also possible for a lawyer to simply represent us during the notarial sale without documented and express power of attorney, with the person represented confirming the legal transaction afterwards in the presence of the notary.  However, this approach attracts additional costs and can also have further drawbacks.  The transfer to the buyer is provisionally invalid, i.e. the transfer is not valid until the notarial confirmation has been entered in the land register.  This always presents difficulties if the buyer of the property has to bankroll the purchase price and requires a loan guaranteed by a mortgage, for example.  In such cases, the sale cannot take place because the mortgage only counts as a guarantee if it is entered in the land register.

Carlos Prieto Cid, Lawyer

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