Powers of Attorney and obtaining retired partners' signatures to property documentation
When a partner leaves a partnership there can be difficulties in obtaining their signature to property documentation where the relationship with the retired partner has deteriorated or contact has been lost. We outline a potential solution.
Risks that can arise when property ownership is not updated following partner changes
If the legal title to the property is not updated into the names of new or continuing partners in the partnership this can prevent the partnership from entering into new leases of the property or securing bank funding against the property. This is because, while a retired partner remains named on the legal title to the property, their signature will be required to any documentation affecting the property. This can have significant effects on the partnership's continuing business if a retired partner is unavailable or refuses to cooperate in a key transaction.
This may also lead to non-compliance with the terms of any loan from the bank, any lease of the property or your buildings insurance policy. It is therefore essential that you notify your bank and your insurers of any changes in the partnership and take steps to update the legal title to the property into the names of current partners.
Power of Attorney
To protect against the risks outlined above, a power of attorney clause can be included in your partnership agreement. A suitable power of attorney clause should allow current partners to sign some property related legal documentation on behalf of a partner following their retirement or departure from the partnership.
Inclusion of a power of attorney clause should allow the partnership to continue to manage partnership property and allow a continuing partner to sign the relevant property documentation on behalf of the retired partner. This can prevent blocks to key transactions and allow continued management of the partnership's property.
You should review your partnership agreement to make sure you have included a workable power of attorney clause to protect against the above outlined risks. If you are unsure whether your partnership agreement includes an effective power of attorney clause you should take specialist legal advice on your partnership agreement.