Bulletin: NY000058

Dear Associates:

Several amendments to the General Obligations Law (GOL) which become effective on October 1, 1994 will substantially affect the statutory short form power of attorney which is frequently used in real estate transactions. Summarizing the most significant changes in the law, Section 5-1501 of the GOL was amended to provide that:

1. a principal who executes a power of attorney must initial each power he intends to give to his attorney-in-fact. This differs dramatically from the present practice of drawing a line through the text of each power not given to the attorney-in-fact and initialing in the box opposite. A power of attorney which was executed prior to October 1, 1994 will continue to be governed by the prior law. However, powers executed on or after October 1 are governed by the amendment described above. New forms are being prepared, but in the coming weeks and months closing personnel must carefully scrutinize powers of attorney to determine which law controls;
   
   
2. a new box (N) be added to the list of powers that can be granted to the attorney-in-fact which will require the principal to initial the box if he wants the authority of his attorney-in-fact to survive his subsequent disability or incompetence. Failure to check this box will result in the termination of the authority of the attorney-in-fact to act after the principal becomes disabled or incompetent.
   
   
3. the notice provision which must appear in the Power of Attorney form set forth in Sec. 5-1501 of the GOL be expanded;
   
   
4. where 2 or more persons are to be appointed as attorneys-in-fact, the word "OR" is to be inserted between the names of each agent and the word "SEPARATELY" specified to show that each has authority to act separately, and where joint action is required, the word "AND" is to be inserted between the names of each agent and the word "JOINTLY" specified to show that the agents are required to act together. Failure to use any of the above words will result in a requirement that both agents must act jointly;
   
   
5. a power must be written, typed or printed using letters or clear type not less than twelve-point in size (or the equivalent if the power is in writing).

A further change from existing practice is contained in Section 5-1506 of the GOL. The prior law authorized the use of a "springing power", i.e., one which would not take effect until a future time or the occurrence of a specified future event. The new statute provides a form for a "springing power" in which the principal gives his agent authority to act, but only upon the happening of either (1) the signing of a written statement by a physician(s), psychologist or psychiatrist certifying that the principal is suffering from diminished capacity that precludes him from acting in a competent manner, or (2) the signing of a written statement by a person named in the power certifying that a specified event has occurred. The principal must choose one of the above options, but never both. Failure to select either option will result in a presumption under the statute that the first option is applicable. Until further notice, any utilization of a "springing power" should be approved by company counsel prior to closing.

These changes should be communicated to all our personnel and agents as soon as possible. New forms reflecting the changes described in this memorandum are being prepared and will be distributed as soon as they become available.

Should you have any questions, please contact Company Counsel.