Be careful when granting power of attorney when selling a vehicle

The following scenario is not fiction, but reflects the real-life experiences of clients – not only those of the Příbram Transport Authority – which the Vehicle Registration Authority encounters on a virtually daily basis. Very often, however, it can result in significant financial penalties, trouble with the police and the authorities, and in extreme cases even debt enforcement proceedings. Unfortunately, all of this is merely the consequence of one’s own negligence and placing undue trust in a stranger.

Karel, the owner of a second-hand Fabia, decided to sell his car and buy a newer one. Through an advertisement, he found a prospective buyer, Pavel, who agreed to the purchase and the price of the second-hand car and drew up a contract of sale with Karel. There were no legal encumbrances on the vehicle, the purchase price was paid upon signing the contract, and the transaction was successfully drawing to a close. There was just one final step left: transferring the vehicle’s registration at the relevant office. Karel knew that, by law, he and Pavel were obliged to complete this transfer within 10 working days. If they failed to do so, they would both face a fine of up to 50,000 crowns. So they set off together to the vehicle registration office (since 1 June 2017, it has been possible to choose any vehicle registration office), where they submitted the roadworthiness test report, the small and large vehicle registration certificates, the green card and a joint application, which they both signed by hand. The office updated the register and the documents whilst they waited, thereby completing the transfer. A simple, quick and ideal option.

However, the law also allows for another option, namely a power of attorney. This involves the seller granting power of attorney to the buyer, the buyer to the seller, or authorising anyone else to arrange the transfer on our behalf. A power of attorney is, not only in the case of vehicle transfers, a classic and traditional legal concept whereby we grant someone the right to act on our behalf. And this is precisely where the rubber meets the road. This is because, through a power of attorney, we grant only the right, and not a legally enforceable obligation, to act. And it is precisely for this reason that the most dangerous option a seller can choose is a situation where they hand over all the documents, keys and a certified written power of attorney to the buyer to whom they have sold their car, so that the buyer can complete the transfer at the relevant authority. They feel they have done everything they needed to do; they have the money for their car, so everything is in perfect order, and the euphoria of a deal well done is in full swing. However, in this situation, the seller is completely unaware that they have just set themselves up for serious trouble. This is because the buyer, although authorised to do so by the seller, often fails to complete the transfer at the relevant office at all; instead, they use the car and commit traffic offences whilst driving it. However, the vehicle has not been transferred to the buyer’s name in the register, and the former owner is still listed as the registered keeper. Consequently, all fines for traffic offences begin to be sent to the former owner’s address. The seller therefore starts looking into the reasons for the uncompleted transfer and tries to contact the new owner, but is unable to do so. Meanwhile, however, fines for offences continue to pile up, and if the seller does not pay them as they come in, late payment penalties will also start to accrue and the first enforcement proceedings will follow. And all this simply because, when selling their second-hand car, the original owner blindly trusted the new owner – in the vast majority of cases, a complete stranger – to fulfil the obligation to transfer ownership of the vehicle on their behalf under a power of attorney. After a lengthy search for the new owner, it sometimes even transpires that the latter has already sold the vehicle on to another person about whom the original owner knows virtually nothing. At that point, the situation is essentially unsolvable for the original owner, and they are left with only one option: a civil dispute over the determination of ownership to be decided by the court. 

The Příbram Transport Authority therefore strongly recommends that all owners selling vehicles consider very carefully and responsibly whom they grant a power of attorney to, and whether it might not be more advantageous for them and, above all, less risky to transfer the vehicle’s ownership themselves, with absolute certainty that they will not be caught out by potential fines, enforcement proceedings and unpleasantness with the police and authorities due to someone else’s irresponsible behaviour. Granting a power of attorney does not, in fact, relieve anyone of their own obligations and thus unnecessarily exposes them to the risk of penalties.