Can a power of attorney borrow money to buy a property?

[delboy1984]

First time posting on this forum so apologies if I've posted in the wrong place.

My question is in the title really - can a power of attorney borrow money from her donor to buy property?

Bit of back story...
Donor had an accident at work, resulting in a serious head injury which meant that she is now never able to work again. She was given a large sum in compensation. Due to the donor not being mentally capable to purchase a house for herself and spending money willy-nilly she appointed her sister as power of attorney to deal with these issues. Fast forward a few years and now the POA is borrowing money from the donor to buy a house. Prior to the agreement the POA was in quite a dier financial situation - credit card, overdraft debt. The POA is saying that she has to pay back the loan to the donor at an agreed amount each month.

My issue is is that since the POA has borrowed the money she's bought a property, paid off her debt and has been spending excessively (gone on holiday etc). My question is - is this legal? If the POA is saying that the donor has agreed to this loan and she has her signature is this allowed? Morally I think it's not right but legally is she allowed to loan money from her sister to benefit herself (with no benefit to the donor) and pay her back?

Any advice would be greatly appreciated :-)

[DustyMaiden]

Definitely not legal. They can’t agree to a loan as they don’t have mental capacity.

[inkblackheart]

The POA gives the attorney the ability to make financial decision on behalf of the person a situation where they are unable to make their own decisions. This does not mean they have access to the money to spend for themselves in any way. This is very serious.

[CointreauVersial]

Buying a house for the donor - maybe.

For herself?? On very dodgy ground.

[Bromptotoo]

Speak to the Office of the Public Guardian - ASAP.

[concernedchild]

Nope. Talk to a solicitor and make the OPG aware of your concerns now

[parietal]

The POA must act in the interests of and in line with the wishes of the donor. This might include a loan but it should be very carefully documented and pay a commercial rate of interest.

[Justcallmebebes]

No, no, no! If the LPA has been activated because the donor lacks capacity, then the attorney cannot take or use money for their own means.

This is theft from a vulnerable person and v serious. You can report any concerns to the OPG but due compliance from sols acting in the house purchase should also flag this up as the sister will have to show where funds are coming from for the purchase

[SquashPenguin]

This sounds like a huge safeguarding issue and I would suspect totally illegal as well.

[catofglory]

As others have said, the attorney has to act in the best interests of the donor.
It seems unlikely that lending the attorney money to buy a house for herself is in the donor's best interests. The donor cannot 'agree' to the loan as she does not have capacity.

Contact the Office of the Public Guardian.

[delboy1984]

Thank you all for your very helpful advice. I thought as much.

The POA has always stated that even though she is POA for her sister, her sister is in her right state of mind to agree to loaning her this money. She stating that she isn't abusing her power and that she has to pay her back each month. She's also stated that when she moves out of the property in 6 years (plans to move abroad then) then she will pay back the loan in full to her sister.

The donor doesn't have carers in place and can function fully on her own in her own home. The POA states that she is fully capable of making this decision.

Obviously sisters can give their siblings loans and gifts, it's just that there must have been a reason big enough for her to be appointed POA in the first place and this is where it gets grey.

[prh47bridge]

Giving someone financial LPA does not require any reason other than taking appropriate precautions. My mother gave me LPA many years before it was actually needed.

Once someone has financial LPA, they can act if the donor consents. Unlike a health & welfare LPA, they can act whilst the donor still has capacity provided the donor consents.

The critical point that most posters seem to have missed is that the attorney claims the donor consented to the loan and, from the sounds of it, signed something to that effect. If the donor has capacity, consented to the loan and there was no undue influence, the loan is legitimate. However, if any of these three points is not true, the loan is not legitimate.

[Bromptotoo]

From the account I doubt the donor has full capacity.

I stand by my original suggestion of contacting the OPG.

[user8800]

Contact the OPG immediately

[EmmaGrundyForPM]

@Justcallmebebes

No, no, no! If the LPA has been activated because the donor lacks capacity, then the attorney cannot take or use money for their own means.

This is theft from a vulnerable person and v serious. You can report any concerns to the OPG but due compliance from sols acting in the house purchase should also flag this up as the sister will have to show where funds are coming from for the purchase

This. You need to report this, it's a breach of the POA

[delboy1984]

@prh47bridge

Giving someone financial LPA does not require any reason other than taking appropriate precautions. My mother gave me LPA many years before it was actually needed.

Once someone has financial LPA, they can act if the donor consents. Unlike a health & welfare LPA, they can act whilst the donor still has capacity provided the donor consents.

The critical point that most posters seem to have missed is that the attorney claims the donor consented to the loan and, from the sounds of it, signed something to that effect. If the donor has capacity, consented to the loan and there was no undue influence, the loan is legitimate. However, if any of these three points is not true, the loan is not legitimate.

@prh47bridge

Thank you for your response.

You said that giving someone LPA does not require any reason other than taking appropriate precautions. I do understand this. I understand that you have to be mentally capable to appoint someone in the first place and then if things deteriorate, they can step in. But considering the POA was appointed in the first place and has had to deal with financial situations the donor can't deal with herself already surely the POA has had to use her power because they're not capable of dealing with these financial issues already?

[prh47bridge]

Not necessarily. When appointing a financial LPA, there is a box the donor can tick that allows the attorney to act immediately. If that is ticked, the attorney can act even when the donor has capacity.

Of course, if the donor has capacity, she could have given the attorney a loan without any need for the attorney to use her powers.

If the donor has capacity, the central question is whether she consented to the loan. If she did and there was no undue influence, it is not obvious that anyone has done anything wrong.

[Bromptotoo]

Re reading this thread I'm left wondering whether this is a donor/attorney situation or whether the Court appointed the sister as what we used to call a Receiver.

[concernedchild]

@delboy1984 does the donor lack capacity or not?

If not they can do what they wish with their money.

[OneFrenchEgg]

Remember that capacity is decision specific (obviously if someone is unconscious that's irrelevant) not person specific.

[delboy1984]

@concernedchild

@delboy1984 does the donor lack capacity or not?

If not they can do what they wish with their money.

@concernedchild the donor lives alone and can function fully independently but needed to appoint a power of attorney to help with financial matters as she was spending excessively and needed help to purchase her own house etc. It's a hard question to answer really. Mentally she's with it but she would have spent all her money if left to her own devices as she didn't comprehend that she can't work again and the compensation has to last her her while life.

[TizerorFizz]

So she consented to give the money away instead? It’s difficult to see how the attorney is acting in the best interests of the donor here. I thought that was key in the arrangement.

[prh47bridge]

@TizerorFizz

So she consented to give the money away instead? It’s difficult to see how the attorney is acting in the best interests of the donor here. I thought that was key in the arrangement.

The attorney must use the power under the LPA in the donor's best interests. However, it is not clear if the attorney has used their power here. The decision to make the loan may have been taken by the donor. Having said that, I think this loan is ill advised even if the donor had capacity and consented as claimed. As others have suggested, OP should contact the Office of the Public Guardian who can take action if the attorney has acted incorrectly.

[Lovemybunnies]

The OPG are really good in these situations. Definitely call them.

[TizerorFizz]

I would expect “consent” to be a loan agreement. Written and signed by both parties. It’s difficult to see how a loan is in the interests of the donor here so definitely speak to OPG.

[BorgQueen]

How did the attorney get through the conveyancing process that requires hard evidence of where the money came from?
We only gifted our DD a deposit and had to go through stringent checks and provide a paper trail of where the money came from,
plus we had to sign a letter stating it was a gift not a loan.