The Special Power of Attorney in a Real Estate Transaction

In real estate dealings, one would come across the term ‘Special Power of Attorney’, more commonly shortened to ‘SPA’.

What is a Special Power of Attorney?

What does it do? Who are involved in an SPA? What is an Attorney-in-Fact? What are the functions of an Attorney-in-Fact? What is the role of an SPA in a real estate transaction? What are the details found in an SPA? When does an SPA take effect and when does the authority end? Why does an SPA need to be notarized or authenticated?

Legal Basis of a Special Power of Attorney

The Special Power of Attorney’s legal basis is found on Article 1878 of the Civil Code of the Philippines, under the heading of “Agency” and the sub-heading of “Nature, Form and Kinds of Agency”.

By the term “agency”,  we refer to a contract that binds a person to do a service on behalf of another person who authorizes the act (Art. 1868, 1709a).

Persons involved in a Special Power of Attorney

An SPA is a contract or agreement between 2 persons, with 1 person granting the authority (called the principal) and the other person being given the authority (called the agent or Attorney-in-Fact). The principal and the Attorney-in-Fact could be known to each other as family, friends, client-and-lawyer, etc.

The ‘service’ can either be general or specific (Art. 1876, Civil Code). Since we are talking about the Special Power of Attorney in this article, then we speak of a specific act or set of acts, as well as the limitations and extent of the Attorney-in-Fact’s authority.

The act or set of acts may be legal or financial in nature.

Reasons for writing a Special Power of Attorney related to real estate

The applicable Civil Code provision as far as real estate transactions are concerned, is found in Item (5) of Art. 1878: “To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration.” The “immovable” referred to pertains to real estate property: land, house and lot, or any improvement (building, etc).

If a principal cannot be present in the area (city, municipality, province) or in the Philippines where the real transaction will take place (the principal works and lives in another country), it is best for the principal to execute an SPA.

The SPA is written to create or convey real rights over immovable property, to convey or acquire immovable property, to borrow money to buy immovable property, to lease any real property to another person for more than one year, pay estate taxes in case of property inheritance, etc.

The SPA must include the following details:

• The names, addresses, citizenship, civil status of the principal and Attorney-in-Fact; also state that both the principal and the Attorney-in-Fact are of legal ages to enter into this contract;
• The specific acts that the principal authorizes the Attorney-in-Fact to do on his/her behalf (to sell a property, to lease a property or lease out a property, to buy property, to receive money which are proceeds of a property sale, to send money as proceeds of a property sale, to sign contracts related to the sale, lease or purchase of a property, to pay for the estate taxes of a property in case of inheritance, etc.)
• Valid (meaning current and not expired) IDs of the principal and Attorney-in-Fact; these IDs are otherwise known as ‘competent evidence of identity’.

Notarizing/Authenticating the SPA

An SPA that pertains to a real estate transaction has to be in writing.

Notarizing or authenticating the SPA will make it a public document and it now can be admitted as evidence in a court of law.

If the SPA is executed in the Philippines, a notary public will authenticate the SPA.

If the SPA is executed abroad, it must be certified and authenticated according to the Rules of Court, particularly Sec. 25, Rule 132.

Authenticating the SPA Abroad – The Apostille Convention

Before May 2019, there was only one way to authenticate a document signed abroad by a principal: go to the Philippine Consular Office and have an officer authenticate the document (remember that red ribbon?).

In May 14, 2019, the Philippines joined the Apostille Convention. The 1961 Hague Convention, whose official name  is Abolishing the Requirement of Legalisation for Foreign Public Documents, is now more popularly known for its much shorter name: the Apostille Convention.

The Apostille Convention makes easier the authentication of documents between member-countries by streamlining the process.

In the US, for example, there is no need for the principal to go to the Phil. Consular Office to have his/her document authenticated. All he or she has to do is to appear before a notary public, usually an accountant or lawyer, for notarization. The notary public then sends the signed document to that State’s Secretary for authentication and then receives the authenticated documents back on behalf of the principal.

However, there are still countries who are not members of the Apostille Convention. Some of these countries are Kuwait, Qatar, Saudi Arabia, UAE, Singapore, Taiwan and Canada. Do take note that there is notable Filipino presence in these countries, either as OFWs or as immigrants. It is best to check which countries are members of the Apostille Convention to know how your document authentication will be processed.

Validity of an SPA

An SPA becomes effective on the date it is certified and authenticated.

The validity ceases once:

• the transaction is over;
• either the principal or the Attorney-in-Fact dies that results to the extinguishment of the agreement;
• or one or both parties revoke/s the agreement, with a revocation letter.

In the Philippines, however, sometimes government agencies like the BIR and the Registry of Deeds, require that an SPA be “fresh”, meaning at least a year old from the time it has been issued.

The SPA is an important legal document that you may need in your real estate transactions. I hope that this blog has been able to help you understand what the SPA is all about.