The Kentucky legislature's passage of comprehensive new power of attorney legislation in 2018 added protections as well as responsibilities for third parties. These help to protect lenders, real estate sellers or buyers, or other entities doing business with agents appointed under powers of attorney. A nonagent third party may question the validity of the appointment, scope of power granted or meaning of some other aspect of the appointing document.
When in a business or real estate transaction a party faces doing business with an agent under a power of attorney, rather than with the principal to the transaction, it can be nerve wracking. The person may be concerned that the document is valid or that the agent has the legal authority to conduct the business at hand, especially if the transaction involves significant money or assets.
Some provisions in the new law that may be relevant:
- Normally, a photocopy or faxed or emailed copy is acceptable.
- If the power of attorney becomes effective upon the principal's incapacity, the principal may have designated someone to determine incapacity. Otherwise, the power starts when a medical professional, attorney or judge makes this determination.
- If there are coagents, one may act alone, unless the power of attorney says otherwise.
Remedies for Third Parties
One major provision is that anyone asked to accept a power of attorney may petition the state District Court to interpret the document or examine actions of the agent.
Another section provides a process when the principal's signature was acknowledged, meaning notarized or otherwise similarly authorized. A third party who in good faith and with no knowledge that the signature is "not genuine" accepts an acknowledged power of attorney may presume it is genuine.
Similarly, if the third party accepts an acknowledged power of attorney in good faith with no knowledge of invalidity or of the agent exceeding his or her authority may rely on the power of attorney as valid and the agent's actions within its coverage.
A third party asked to accept an acknowledged power of attorney may ask for and rely on:
- The agent's "certification under penalty of perjury" of any fact related to the power of attorney, agent or principal
- English translation of any part of the power of attorney that is in another language
- A lawyer's opinion about any legal matter related to the power of attorney
The principal must pay for the translation or legal opinion if the third party makes the request within seven business days from the presentation of the power of attorney.
The third party must either accept the acknowledged power of attorney or request the certification, legal opinion or translation within seven business days from presentation. After getting the requested writing back, the third party has five business days to accept the power of attorney and may not ask for a different document than the one already acknowledged. The third party accepting in good faith in these circumstances will not be liable for resulting problems.
On the other hand, if the third party does not accept an acknowledged power of attorney in these circumstances, the party could face a court order to accept it and to pay related legal fees and costs.
Right to Refuse
There are specific situations, however, when the third party may refuse an acknowledged power of attorney:
- Knowledge of the termination of the agent's power
- Good faith belief the power of attorney is invalid or that the agent does not have the power required
- Third party made or knows another person made a report to the state of a good faith belief the agent has abused or exploited the principal
- Other enumerated situations
This is a broad overview of a very detailed new Kentucky law. Any third party dealing with appointed agents should get thorough advice from a knowledgeable lawyer.