Selling a house when the owner has lost capacity: attorneys, QCAT and the traps

Capacity is decision-specific, and it is presumed

Queensland law presumes every adult has capacity. Capacity is not a global switch — it is assessed against the particular decision being made. A person may lack the capacity to manage a share portfolio and still have the capacity to make a will, or the reverse.

For selling a house, the question is whether the owner understands the nature and effect of the decision: that the property will no longer be theirs, roughly what it is worth, what the money will be used for, and who is involved. A diagnosis of dementia does not by itself answer that question. Capacity can also fluctuate, and a person may be capable in the morning and not in the afternoon.

Where there is any doubt, the right step is a written capacity assessment from the treating GP or a geriatrician, addressed to the specific decision, obtained at the time — not reconstructed two years later when someone challenges the sale.

If there is an enduring power of attorney

An enduring power of attorney for financial matters is the document that makes this manageable. Provided it is validly made and the financial power has commenced, the attorney can sign the contract, sign the transfer and deal with the proceeds on the owner's behalf.

Several things have to be checked before the attorney does anything, and they are the things most commonly missed:

• Has the financial power actually started? Many enduring powers of attorney state that financial power begins immediately; others begin only on loss of capacity. Read the document rather than assuming.
• Is it the current document? A later enduring power of attorney revokes an earlier one, and a will does not appoint an attorney. We see families acting on a superseded 2011 form.
• Are attorneys appointed jointly or severally? If jointly, every attorney must sign. A contract signed by one of two joint attorneys is defective.
• Was it validly executed under Queensland law? Interstate documents can generally be recognised, but they need to be checked before contract, not at settlement.
• Is there a specific restriction? Some documents expressly exclude dealing with the principal's home, or require the principal's family to be consulted.

The attorney's duties — and conflict transactions

An attorney under the Powers of Attorney Act 1998 (Qld) must act honestly, with reasonable diligence, in the principal's best interests, and must keep the principal's property separate from their own. Records must be kept.

The rule that catches families out is the conflict transaction rule. An attorney cannot enter into a transaction in which the attorney's interest, or the interest of a relative or close associate, conflicts with the principal's interest — unless the principal authorised it while capable, or QCAT approves it.

Selling the house on the open market at market value to a stranger is not a conflict transaction. Selling it to the attorney, to the attorney's spouse or child, or to a company the attorney controls is, no matter how fair the price. So is using the proceeds to repay a loan owed to the attorney, or gifting part of the money to the family. Those transactions need QCAT approval before they happen, and unwinding one afterwards is expensive and often bitter.

If there is no enduring power of attorney

This is the situation nobody plans for. Once capacity is lost, an enduring power of attorney can no longer be made — the principal must have capacity to sign it. There is no way to fix it retrospectively, and no family member has automatic authority simply by being next of kin.

The only path is an application to the Queensland Civil and Administrative Tribunal for the appointment of an administrator for financial matters. QCAT may appoint a family member, or, where the family is in conflict or the estate is complex, the Public Trustee.

Expect the process to take months, not weeks. A QCAT application requires medical evidence of impaired capacity, notice to interested parties, and often a hearing. If the sale is being driven by an aged care accommodation deposit deadline, that timing gap has to be managed with the facility — and it is why we press clients to have the enduring documents done while there is still time.

How the sale actually runs

Where an attorney or administrator is selling, the transaction has extra moving parts that need to be in place before the property is listed, not discovered at settlement.

• The original enduring power of attorney, or the QCAT order, is reviewed and a certified copy prepared for the buyer's solicitor and Titles Queensland.
• The contract is signed in the correct form — as attorney for the owner, with the capacity in which the signatory acts stated on the document.
• The seller disclosure statement is completed by the attorney with appropriate qualifications where the attorney genuinely does not know the property's history.
• A market appraisal, or better, two, is placed on file. An attorney who sells at under market value to a quick buyer will be asked to justify it.
• Proceeds go into an account in the principal's name, not the attorney's. Mixing funds is the most common breach we see, and it is usually careless rather than dishonest.
• Aged care means testing is considered before settlement, because the sale converts an exempt or partly exempt asset into an assessable one and can change the resident's daily fee.

For agents and buyers

Agents: if the person instructing you is not the registered owner, ask for the document before you take the listing and send it to the solicitor. A listing authority signed by someone with no authority is not worth the paper, and the commission follows the same fate.

Buyers: a property sold by an attorney or administrator is a perfectly normal purchase, but your solicitor should sight the authority and confirm the seller can give clear title. The risk being managed is not the price — it is whether the transfer will register.

Selling when the owner has lost capacity — common questions