Thousands of people who took steps to protect their affairs or those of elderly relatives if they become incapable could unwittingly be in breach of the law, The Times has learned.
People who rushed to take out an old-style power of attorney before the law changed on October 1 may have executed their documents invalidly because of confusion over the legal requirements.
Many solicitors erroneously told members of the public that to obtain an enduring power of attorney (EPA) all they had to do was to sign the documents themselves.
But the Office of Public Guardianship has now clarified that in order to be valid the documents had to be signed before October 1 both by the person who is granting the power and the person who would take it on and manage their affairs.
As a result, thousands of vulnerable people are currently without the protection they thought they had and may face hefty bills of up to £1000 to re-apply under the new laws. In some cases it may be too late, if they or relatives have since become incapable.
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The Law Society of England and Wales, which represents 100,000 solicitors, has had to issue a clarification on its professional update website, giving warning to solicitors that they may need to take further steps to rectify the situation.
Many solicitors encouraged people to take out enduring powers to attorney before the law changed. The reason, law firms said, was that the new “lasting power of attorney”, which replaced the EPAs, was much more complicated to draw up and much more costly.
They estimated that the new procedure would involve a rise in costs from £120 to several hundred pounds — and some solicitors said it would be as much £1000 once legal fees were taken into account.
Tim Spencer-Lane, head of policy at the Law Society, said that the society had been approached by a number of firms for a clarification of the law before October 1.
The confusion had arisen, he said, because the Mental Incapacity Act stated that enduring powers of attorney had to be “created” not “executed” before that date to be valid.
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“There was a widespread view and some discussion that this meant that only the person seeking to take out the EPA needed to sign it — and not the person to whom it would apply.”
“We took the view that to be valid, then EPAs had to be signed both the donor and the recipient. But a lot of solicitors were telling people that this was not the case, although to be fair the law is not clear cut.”
Several firms made further inquiries of the Society after October 1, he added, as a result of which it sought clarification from the Office of the Public Guardian, which registers the claims.
“The Office has clearly said that it won’t register EPAs that are not signed by the attorneys before October 1.”
He said that solicitors would now have to consider whether, in the circumstances of each case, they should draw up the new enduring powers of attorney free of charge for clients.
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Roger Peters, head of the private client practice at Gordon Dadds, the London firm of solicitors, said: “We were conscious of this issue at the time. The point is arguable, so the confusion is understandable and I don’t believe solicitors could be held to be negligent.
“But we took the view here that forms should be signed both by the donor and the attorney.”
Solicitors now should advise clients to take one of various steps, he said. In some cases people would be able to rely on the defective enduring powers of attorney because these would work until the person became incapable, granting a limited authority to manage their affairs. “Not everyone becomes becomes mentally incapable or reaches a point where their affairs can’t be dealt with in this way.”
Alternatively, they would have to apply for the new lasting power of attorney, which could cost as much as £800 to £1000, including legal fees and VAT.
If, however, the donor had by now become incapable, the only option was to apply to the Court of Protection to be a deputy for the person, Mr Peters said. But that process has been criticised as more costly, cumbersome and bureaucratic and giving far less flexibility than acting as an attorney.
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“The tragic thing is that the old enduring power of attorney worked very well in 90 per cent of cases but because of a few high-profile abuses they have taken a sledgehammer to crack a nut.”