Unfortunately, elderly adults in the U.S. fall victim to various forms of abuse or exploitation. As humans age, we naturally lose some of our cognitive abilities. Serious medical conditions, such as Alzheimer’s and dementia, exacerbate cognitive decline and make seniors vulnerable to scams and schemes intended to steal their assets.
Typically, one of the most significant assets a person owns is their house, and scammers often try various methods to defraud elderly individuals into selling their homes. One method is to coerce an older adult not of sound mind to enter a real estate contract and sell their house to the scammer.
But the case is not always so clear. In some instances, a person may try to purchase a property from an elderly adult in good faith, believing the seller is mentally competent enough to be aware of and approve the transaction. Only later does information come to light about the seller’s mental competency that essentially voids the real estate contract. The result can be a contentious legal matter that requires litigation to sort things out.
What Is the PERRY Act?
Famous singer and entertainer Katy Perry and her partner Orlando Bloom are currently embroiled in a legal fight with the 84-year-old founder of 1-800-FLOWERS, Carl Wescott. Perry’s manager, Bernie Gudvi, served as her agent in a deal to buy Westcott’s Montecito, California, home in 2020. Perry and Bloom purchased the home for $15 million.
However, Westcott filed suit against Gudvi, claiming he was of “unsound mind” when he agreed to the transaction. He claims he was under opiate medication due to a recent back surgery, and he also has Huntington’s disease. Neither Perry nor Gudvi agreed to back out of the deal. Gudvi’s legal counsel argues that Westcott was competent enough to hire a real estate agent, entertain offers and negotiate, and play an active part in the transaction–he also seemed eager to complete the process. Gudvi countersued Westcott for more than $5 million.
Regardless of how the case plays out, it has prompted watchdogs for older Americans to propose the PERRY Act—or the Protecting Elderly Realty for Retirement Years Act. The proposed law “addresses the risks of elder financial abuse,” particularly regarding real estate transactions. The Act would require a 72-hour cool-down period, during which either party involved in a contract for the sale of a personal residence, where one party is over the age of 75, can rescind the agreement without penalty. Some states, like NJ, already have “cooling off” laws in place that allow either party to cancel a realtor prepared residential real estate contract within a certain amount of time of receiving the fully executed contract, regardless of the parties’ ages.
Elderly Financial Exploitation Is Serious
The American Bar Association’s (ABA) Commission on Law and Aging, in partnership with the Bureau of Justice Assistance (BJA), has published a guide to recognize elder abuse and exploitation. The guide defines elder financial exploitation as the “illegal or improper use of an elder’s funds, property, or assets.” This includes coercing an older individual into signing contracts or using undue influence over them through guardianship or power of attorney.
Real estate contracts form the cornerstone of any real estate transaction. One of the most important elements of a real estate contract is that all parties must be legally competent at the time of signing. Contracts require mutual consent, meaning both parties understand and agree to the contract’s terms and conditions.
It’s obviously never appropriate for a party to coerce another person into signing a contract when capacity is at issue. Doing so is not only unethical, but on a practical level, the contract could be voided. Depending on the level of knowledge and complicity, the party may also face a civil lawsuit and in certain cases, criminal penalties.
Attorney Review: Real Estate Contracts Are Important!
Although Katy Perry’s case does not appear to involve intentional fraud or misconduct, it underscores the importance of real estate contracts, especially those involving elderly individuals.
No matter your age, if you plan to buy or sell a home—or any property—an attorney review of the contact is important. Having an attorney review, explain, and suggest revisions to the contract will help protect your rights and your assets, and can help ensure the process goes smoothly. You’ll also be protected and have recourse if things don’t go as planned.
For guidance related to real estate questions and to get legal counsel and assistance throughout a real estate transaction, or for questions related to protection for individuals who may lack the capacity to enter into contracts, contact Melanie Levan at 856-354-7700 or firstname.lastname@example.org.