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Commercial Lenders and Lessors Beware!

5/7/2015 | Commercial Litigation Blog

Commercial Lenders and Lessors Beware!

The Pennsylvania Legislature changed the law on the form and use of Powers of Attorney, effective January 1, 2015.

But they goofed in drafting the statute, with adverse effects on Warrants of Attorney to Confess Judgment, and now they are trying to fix it….

As of January 1, 2015, all commercial loan and lease documents containing a warrant of attorney must be acknowledged before a notary public (as has been the case with mortgages and other recordable documents).

AND, the new statute imposes a laundry list of duties on the grantee of the warrant of attorney (the bank, the landlord, and so on) that could make it effectively impossible to enforce the warrant.  The most troublesome of these provisions says that an agent (meaning, the bank, landlord, or other grantee) must always act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest.

It may be impossible to satisfy the “best interests” test in the context of a Warrant of Attorney, and it is probably non-waivable..

None of this appears to have been intended, but an erroneous cross-reference in the statute failed to exclude Warrants of Attorney from these requirements.

A bill (2015 HB 665) is pending in the state Senate (it already passed the House, 194-0) to correct the drafting error, retroactive to 1/1/15. 

In the meantime, documents containing Warrants of Attorney that were executed after January 1, 2015 may be vulnerable to attack if they are used to confess a judgment before the fix is enacted.  It may be a good idea to wait, since the corrective bll seems likely to pass quickly.

We’d be happy to discuss this with you.

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