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Powers of attorney are written authorizations to represent or act on another person’s behalf.  The person granting the authorization is the principal and the person to whom authorization is granted is the agent.  A standard power of attorney gives the agent the authority to act immediately and identifies the specific powers that the agent may exercise.  In the case of springing powers of attorney, the document will identify the triggering event that gives the agent the authority to act at some point in the future.

These documents can be immensely useful for a principal suffering from an incapacity, which is to say, an individual who: (1) has an impaired ability to receive and evaluate information, (2) is missing, (3) is detained, be it in the penal system or otherwise, or (4) is outside of the United States and unable to return.  Notwithstanding the cause of the principal’s incapacity, the agent (if given the relevant authority in the power of attorney) may make financial decisions for the principal, purchase or sell property on behalf of the principal, make healthcare decisions, etc.  All of those actions, however, are prevented when the relevant bank, title agency, or healthcare provider wrongfully rejects a lawful power of attorney.

Lawful powers of attorney are often rejected for inane reasons including preparing the power of attorney more than six months prior to the date that the agent presents it or naming a second or successor agent.  Responding to the concerns of the constituency, members of the Ohio House of Representatives recently sponsored House Bill (H.B.) No. 446, which operates to remedy the all-too-common practice of rejecting lawful powers of attorney.  The bill does not alter language in the Ohio Revised Code, but rather, it adds the following to Chapter 1337:

(A)       As used in this section, “acknowledged” means verified before a notary public or other individual authorized to take acknowledgements.

(B)       A person shall not refuse to accept an acknowledged power of attorney for a transaction, or require an additional or different form of power of attorney for any authority granted in a statutory form power of attorney, unless one of the following applies:

• The person has actual knowledge of the termination of the agent’s authority or of the power of attorney.
• The person in good faith believes that the transaction is outside the scope of the authority granted to the agent in the power of attorney.
• The person in good faith believes that the power of attorney is not valid.

(C)       A person that fails to comply with this section is subject to both of the following:

• A court order mandating the acceptance of the power of attorney;
• Liability for reasonable attorneys’ fees and costs incurred in any action or proceeding that confirms the validity of the power of attorney or mandates acceptance of the power of attorney.

On January 16, 2018, the Ohio House of Representatives referred H.B. 446 to the Civil Justice Committee, which is where the bill remains today.  The Committee held its first hearing regarding the same on January 24, 2018.

The primary sponsors of the bill are Rep. William Seitz (R) and Rep. John Rogers (D).  The co-sponsors are Rep. Nickie Antonio (D), Rep. John Becker (R), Rep. John Boccieri (D), Rep. Nicholas Celebrezze (D), Rep. Teresa Fedor (D), Rep. Bernadine Kent (D), Rep. Michael Sheehy (D), and Rep. Kent Smith (D).

Imagine you are trying to sell a piece of property, but no one is making any offers.  That is, until a prospective purchaser offers to buy the property on a land installment contract.  You can hardly contain your relief at being able to move on, so you sign the contract without understanding some of the terms, or even what a land installment contract is.  That leads to the questions, “What did I just sign” and “Did I agree to something I shouldn’t have?”

A land installment contract (also known as an installment contract or a land contract) is an agreement between a seller (vendor) of real property and a buyer (vendee), pursuant to which the vendor agrees to sell real property after the vendee pays a series of installments and other obligations set forth in the land installment contract (such as payment of real estate taxes and assessments, utilities, etc.) over a set period of time.  Essentially, the vendor is acting as a lender in the transaction by allowing the buyer to make a series of small payments not unlike a mortgage payment.  From a legal perspective, the vendor is the legal title holder and the real estate and the vendee is the equitable owner of the property.

Selling on a land installment contract can be beneficial when: (i) the vendor has unsuccessfully listed their property on the market for a long period of time, (ii) the vendor does not need the equity from their property in order to pursue the purchase of their next piece of property, or (iii) a prospective purchaser is having a difficult time obtaining traditional financing (in which case a sizable down payment is preferential).

In addition to the standard provisions you need to watch out for (e.g., the purchase price, the closing date, inspection terms, etc.) there are clauses that can be problematic for the selling party.  One such clause is the vendee’s right to make repairs of undisclosed items on the property, and then deduct the cost of such repairs from the final payment.  That clause could sound as innocuous as something like this:

In the event that the vendors fail to pay any amounts due and owing hereunder, the vendees may pay such amount at buyers’ complete and sole discretion, and thereafter deduct the amount of such payment from the final payment.

On its face, this clause doesn’t sound problematic, but when coupled with other clauses in the land installment contract, such as the following, it becomes an issue:

In the event that any representation or warranty of vendors is false, vendees shall have the right, at their absolute discretion, to either: (i) rescind this agreement and refund all amounts paid under the same or (ii) reduce the final payment owed to vendors for any and all losses, liabilities, costs, or expenses associated with vendors’ false representation or warranty; provided, however, that no reduction may occur for losses, liabilities, costs, or expenses associated with any replacement, maintenance or repair of an item on the property that was conspicuously disclosed to vendees.

Essentially, this gives the vendee the power to make repairs on any item on the property that is in need of repair, which need is at the vendee’s absolute discretion.  The scrupulous vendee may elect to fix the most minor damage, regardless of the cost, because the cost will be deducted from the final payment and the vendee won’t lose any money.  Instead, the vendee obtains all of the benefit, and the cost for such benefit will come straight from the vendor’s pocket.

Ultimately, if your property has been on the market for a long period of time and a prospective vendee offers you a land installment contract, you can breathe your sigh of relief, but do not sign the land installment contract until you are absolutely sure you understand the terms contained therein.  It is highly recommended that you seek legal counsel to represent your interests prior to entering into the land installment contract.

Contact Finney Law Firm to see how we can help you with your real estate needs and transactions.