The limitations of a property and financial affairs LPA; why advice is essential for attorneys

Planning ahead may mean that someone wants to create a lasting power of attorney (LPA) to appoint an attorney – someone they know and trust, who does not need to have legal qualifications – to make decisions on their behalf. These decisions can cover their property and their finances.

The Property and Financial Affairs LPA may allow an attorney to make decisions regarding buying or selling property, investing the donor’s savings or making payments to third parties. When exercising powers under this LPA, the attorney should think about the various duties set out in the Mental Capacity Act 2005 and take legal advice ahead of any significant decisions.

The need for proper advice has been highlighted in the recent case of Chandler v Lombardi [2022] EWHC 22 (Ch).

In this case, there was a family dispute following Ms Chandler’s death, between Mr Chandler, her son and executor of her estate,  and her daughter, Ms Lombardi, regarding the transfer of Ms Chandler’s property.

Ms Lombardi acted as Property and Financial Affairs attorney for her mother and made the decision to transfer her mother’s property into the joint names of Ms Chandler and herself as tenants in common.

Ms Chandler had had previous discussions with her solicitors about appointing Ms Lombardi as her attorney, amending her will to leave the property to Ms Lombardi solely and transferring the property into the joint names of Ms Chandler and Ms Lombardi.

Following registration of her LPAs, however, Ms Chandler was diagnosed with dementia. Ms Lombardi sought to transfer the property in line with her mother’s earlier discussions with the solicitors. But she had not sought permission from the Court of Protection to do so.

The court held that Ms Lombardi had not had authority to do this as this fell outside s.12 (2) of the Mental Capacity Act 2005. It was determined that Ms Lombardi should have taken steps to inform herself of the extent of her authority (and its limitations) and as a result, the transfer was deemed void.

The court summarised the duties of an attorney in this situation and emphasised that not knowing that permission should be sought from the Court of Protection for these types of decisions was not an adequate defence.

The duties of an attorney under a Property and Financial Affairs LPA are very clear. They are set out in the Mental Capacity Act 2005 and the Mental Capacity Act Code of Practice.

However, attorneys (and similarly, deputies) may not always understand this area of law and may be unaware that they are acting outside their authority. In this case, it would appear that the professionals involved in the transfer of the asset were similarly unaware that a further court authorisation was required.

We recommend seeking advice from legal professionals who specialise in this area of law, so the implications of a decision or transaction can be considered ahead of time. There may be instances where attorneys (and deputies) will need to apply to the Court of Protection to seek specific authority to purchase a property, to invest in a particular venture or perhaps to make gifts that fall outside their usual authority.

The quality of decision-making by any attorney is only as good as the information they have available to them. It is a legal professional’s role to ensure the best information is provided to an attorney, so the correct decisions are made in the donor’s best interests.