An irrevocable power of attorney in a real estate transaction: what it secures and what it does not

What makes it irrevocable

The basic rule is laid down in section 14(a) of the Agency Law, 5725-1965: an agency ends when it is revoked by the principal or the agent, and on the death, loss of legal capacity or bankruptcy of either of them.

Section 14(b) is the exception, and the whole institution derives from it: those provisions do not apply where the authority was given to secure the right of another person or of the agent himself, and that right depends on the performance of the subject of the agency.

In other words, a power of attorney is not irrevocable because the word "irrevocable" appears on it. It is irrevocable because it was given to secure someone else's right, and that person's right depends on the act being carried out. In a sale transaction, the right is the purchaser's right to be registered as owner, and the act is the registration.

Why before a notary, and when authentication by an advocate is enough

Section 20(a) of the Notaries Law, 5736-1976, provides that a general power of attorney, and a power of attorney for real estate transactions requiring registration in the land register, shall not be valid unless drawn up by a notary or unless the signatures on it have been authenticated by a notary.

This is not a technicality. It means that such a power of attorney, if not authenticated as required, is not valid at all, and will therefore not be accepted at the Land Registry Office. The section itself makes clear that it does not detract from an advocate's authority to authenticate a signature under the Israel Bar Association Law.

Hence the practical distinction. If the power of attorney is granted to advocates only, for example to the purchaser's advocate, the advocate may authenticate the signature on it without a notary being required. But if the purchaser's own name appears in the power of attorney, even where the advocate's name appears alongside it, a notarial certificate will be required.

Two qualifications worth knowing. Section 20(a1) provides that a power of attorney granted to a banking corporation for a mortgage transaction, including its cancellation, transfer or a change in its terms, is valid even without being drawn up or authenticated by a notary. Section 20(b) provides that the requirement does not apply to a power of attorney given abroad in accordance with the law of the place where it was given, which is relevant to anyone selling or buying from abroad.

What it really does

• It allows registration to be completed even if the seller fails to appear, changes his mind, passes away or becomes insolvent.
• It provides a basis for registering a cautionary note. Section 126(a) of the Land Law expressly provides that, for the purpose of registering the note, it makes no difference whether the undertaking was given in an agreement, in an irrevocable authority or in another document.
• It enables the chain of steps that accompany the transaction to be carried out: filing tax documents, obtaining certificates and signing deeds.

And what it does not do

This is where most misunderstandings lie.

• It does not transfer ownership. Section 7 of the Land Law provides that a real estate transaction is completed by registration, and until then you hold no more than an undertaking. The power of attorney is the tool that enables registration, not a substitute for it.
• It does not block an attachment or a charge. A creditor of the seller who registers an attachment before a cautionary note has been registered in your favour is unaffected by the fact that you hold a power of attorney.
• It is no substitute for a cautionary note. The note is what appears in the register and blocks any conflicting registration. A power of attorney lying in a drawer is visible to no one.
• It is not open-ended. Its irrevocable effect extends only to the transaction it was given to secure. A power of attorney drafted too broadly may turn out to be a problem precisely for the person who signed it.

What it should contain

• Precise identification of the property and of the transaction that the power of attorney is given to secure.
• The names of the attorneys, usually including the advocates of both parties, so that there is no dependence on a single person.
• A list of the permitted acts, in a scope that matches the transaction and goes no further.
• Provision for the case in which the transaction is cancelled, and for how the power of attorney expires in that event.
• Consistency between the wording of the power of attorney and the agreement itself. Any gap between them comes to light at exactly the moment the power of attorney needs to be used.

Bottom line

An irrevocable power of attorney is one of the most effective tools in a real estate transaction, precisely because it survives what would end an ordinary agency. But it secures the ability to act, not the outcome. What protects the purchaser in the register is the cautionary note, and what completes the transaction is registration.

Nothing in this article constitutes legal advice or a substitute for it, and every case is assessed on its own circumstances.