Cavell Leitch Property Solicitor Lauren Jerard discusses a unique situation where clients, an older couple, were found to lack the mental capacity to go ahead with the expected sale of their property. She also notes the risk to real estate agents in these contexts.
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A novel situation occurred for us recently when it was determined that our elderly clients did not have mental capacity to sign the agreement for sale and purchase for the sale of their property. We received the sale agreement from the agent which appeared satisfactory and we rang our clients to discuss the terms of the agreement, at which point confusion arose.
After further conversations with our client and upon further investigation with our clients children, our concerns that our clients lacked mental capacity increased. One client had dementia and the other had recently had a stroke! If our clients could not be explained nor understand the process involved when selling their property then they could not have had mental capacity to sign the agreement. The next step was to determine what to do.
We obtained a medical certificate from their doctor confirming that they did not have mental capacity at the time the agreement was signed. Unfortunately at this point it is too late for our clients to appoint attorneys as mental capacity is required at the time enduring powers of attorney are prepared and signed.
Consequently, we had to apply to the Court for a property manager to be appointed in regards to the property. These appointments are in lieu of the usual enduring powers of attorney and are expected to cost our client $5,000.00 – $8,000.00. The judge in charge of these appointments is required to physically meet our clients.
The purchaser’s solicitor under the agreement for sale and purchase was advised of the situation and that, due to the vendor’s lack of mental capacity, that the agreement is not valid at present.
The risk to agents in these situations is being called to appear in front of the Real Estate Agents Disciplinary Tribunal for allowing vendors to sign an agreement when it appeared they did not have mental capacity. An agent is not required to determine mental capacity for the vendors however, if there is any doubt, we would always recommend seeking an opinion from a doctor to determine capacity.
Lauren Jerard joined the residential and commercial property teams in February 2017 after three and a half years’ experience at a mid-sized law firm in Christchurch. Lauren has experience in all aspects of residential property and enjoys assisting clients with the sale and purchase of their family home. Lauren also has experience in subdivisions for corporate clients with large-scale developments, commercial property and leases, construction contracts, rural transactions and refinancing, trusts, estate planning, and enduring powers of attorney. Lauren’s warm personality, her efficiency and her structured approach to her work means that she is able to provide conscientious service to her clients. Contact Lauren at lauren.jerard@cavell.co.nz
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