Recognition and Enforcement of an Agent’s Authority

The new laws have strengthened the procedures for enforcement of a valid statutory POA. There are also new provisions that encourage third parties to accept a statutory POA without court intervention. To encourage acceptance of a valid statutory POA, the new law provides that a third party may rely upon:

  1. A good faith belief that the POA was properly signed and is valid;
  2. An Agent’s Certification under penalty of perjury of any factual matter concerning the principal, agent, or power of attorney;
  3. An opinion of counsel (licensed attorney) as to any matter of law concerning the power of attorney if the person making the request provides in a writing or other record the reason for the request.

The Good Faith Acceptance Standard (NY GOL §§5-1504(1)(b),(c))

Third parties have been given liability protection if they accept in good faith a statutory POA that is later found to be deficient in any of the following ways:

  1. An invalid signature by the principal
  2. The POA is void, invalid, or has been terminated
  3. The agent is using his or her authority in manners not authorized by the POA

To accept a POA in good faith, the third party must have no actual knowledge of the above deficiencies.

Agent’s Certification and Opinion of Counsel (NY GOL §5-1504(1)(d))

If a third party has concerns about accepting a POA, they may request a certification from the agent regarding the facts about the principal, agent, or the POA.

They may also request an opinion of counsel (a licensed attorney) regarding any matter of law concerning the power of attorney. The request for an opinion of counsel must set forth the reason for the request. If the agent refuses to provide the certification, or the opinion of counsel, the third party may refuse to accept the POA without penalty.

It is unclear based on the legislation what facts the third party would need to verify. The certification might be related to the agent’s knowledge of the principal’s capacity or incapacity, and the agent’s assertion that the POA is in full force and effect. However, the law already provides a separate acknowledgement procedure to deal with whether the agent certifies that he or she is able to act as agent.

The opinion of counsel is not designed to verify facts, only matters of law. This means an opinion of counsel will likely be required where the third party is unsure of whether the document was validly executed, or if certain actions may be taken by the agent, like the ability to make gifts using the principal’s assets.

The New York State Bar Association provided a model form for the previous POA, along with 6 Davies Law Firm, P.C. suggested modifications. It is likely that when a model form for the new law comes out, sample or suggested agent certifications and opinions of counsel will be provided in addition to the new statutory form.

The Procedure for Accepting or Rejecting a Power of Attorney (NY GOL §5-1504(3))

The new law provides a structure for third parties to accept or reject a POA. Here are the steps:

  1. The agent presents the statutory POA to the third party – Either the original POA, or an attorney certified copy, or a County Clerk Certified copy, must be presented. Failure to present the original or an attorney certified POA is a valid reason to refuse to accept the agent’s authority.
  2. Within ten business days, the third party must either accept, reject, or request a full force and effect affidavit from the agent. A rejection must include the reason(s) for the rejection. At this stage, the third party may also request an opinion of counsel or the agent’s certification of factual matters.
  3. If the third party rejects the POA, the agent may submit a response, and within seven business days of receipt of the response, the third party must make a final decision to accept or reject the POA.
  4. If the third party requests a full force and effect affidavit from the agent, once the agent provides the affidavit, the agent’s authority must be recognized within seven business days, or refused again in writing, listing the reason(s) for refusal.

Enforcing the Power of Attorney after a Refusal (NY GOL §5-1510(2)(i))

When a third party refuses to recognize an agent’s authority, the remedy is to begin a Special Proceeding in Supreme Court. The proceeding allows the agent (and other groups of people if needed) to obtain Court review of the third party’s refusal to accept the statutory POA. The Court may order the third party to accept the agent’s authority if the statutory POA is valid. Additionally, under the new law, attorney’s fees and other expenses of the special proceeding may be awarded to the agent and his or her counsel if the third party’s refusal to accept the POA is unreasonable. NY GOL §5-1504(2)(a) provides a list of “reasonable cause[s]” to refuse the agent’s authority.

By including the ability of the court to award attorney’s fees, it may encourage attorneys to litigate these matters when refusal to accept the agent’s authority is clearly unreasonable. As there was no monetary reward for gaining acceptance of the POA under the old law, an attorney would require a retainer to bring the special proceeding, and agents short on funds may have simply given up instead of pursuing the issue.

Many agents wait to present the POA to a third party until after the principal is incapacitated. Refusal to accept the agent’s authority means the principal’s bills cannot be paid, the agent may not be able to apply for government benefits, and other financial issues lie dormant. Giving the special proceeding “teeth” is a positive step.

Recommendation: If an agent has a current POA, it is a good idea to present the bank or other financial institution with the document while the principal still has capacity

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