We who reside in CO went back to WI to clean out my sister's (age 85) room in the jointly owned house (now occupied by the co-owner's sister while co-owner - age 77- is in hospital). We were told that we had no rights, that her POA superseded ours; that even though we had a signed consent by my sister, we could not stay there; we were not entitled to a house key; we had 24 hours to move my sister's belongings out. Since my sister moved to Colorado, she absolutely had no rights - the house has been co-owned for 33 years, and we brought her out here for rehab and to live in assisted living.
If your sister is co-owner of a house [name is on the Deed along with the co-owner], then your sister owns half the house. Your sister does have rights. Sounds like the other co-owner's sister doesn't understand the legality of this. The co-owner's sister's shouldn't even be using the Power of Attorney unless her sister is unable to think for herself anymore.
If the co-owner's sister doesn't want your sister to be part of the house, then the family should buy out your sister's share, which would be half of the equity in the house at today's value, via a licensed Appraiser's findings. Same if the house is later sold.
And JoAnn, my sister has paid all of the bills and taxes for at least 10 years (that we can prove ) ...The co-owner "did the upkeep of the house and bought most of the groceries" - not very equal...!!! No agreement made in the event of not returning, Again, there is much more to this story...unfortunately...
This sounds like the surface of a complicated situation, so I'm glad that you've already obtained an attorney as I suspect the sister's family denying rights is going to create a ruckus that will require legal if not law enforcement assistance.
JoAnn's query about any contractual arrangement is a critical one, as it seems as though your sister was contributing a greater portion of maintenance than the friend. I'm also getting the suspicion that the "friend" was exploiting the situation, at perhaps some level of elder abuse.
Were you able to get your sister's possessions?
If not, another thought is to ask your attorney to explore the issue of an injunction or temporary restraining order to prevent the nasty person in the house from disposing of any assets or possessions of your sister.
Good luck.