Legal updates

A forged power of attorney nullifies the statute of frauds defense in real estate transactions

December 14, 2020

Real estate plots of the Anglican Church in Israel were sold by a person holding a forged power of attorney allegedly executed in the United Kingdom but not bearing a notarization mark or an appositilization stamp.
The Court held that although the purchaser relied on the Land Registry, because the power of attorney was forged, the transactions are void. A person holding a power of attorney of another is empowered by such other to execute transactions on the other’s behalf and is deemed an agent of such other. Israeli Statute of Frauds sets that a person purchasing real estate in good faith and based on the land registry, once the transaction is recorded with the Land Registry, the purchaser’s right trumps over the right of the real owner of the property and the owner may only claim damages. However, the Statute of Frauds does not apply when the transaction was executed with a forged power of attorney because in such case the reliance is on the power and not on the Land Registry. In addition, in order for the purchaser to enjoy the protection of good faith under law, the purchaser must act in good faith throughout the transaction, which must be completed with the recording of rights in the Land Registry. Here, the presentation of an uncertified UK general power of attorney should have raised a ‘red flag,’ and thus, the purchaser cannot be deemed to have acted in good faith because he turned a blind eye to the red flags. Further, the transaction was not completed by recording. Therefore, neither the Statute of Frauds, nor the protection of good faith apply under such circumstances and the transactions are void.