Tenancies when applicant lacks mental capacity to sign

If an applicant for a tenancy lacks the mental capacity to understand and sign a tenancy agreement, I would like to hear your experiences in both of the following senarios:
1) Insisting the tenancy is signed by someone authorised to do so, so for example a donee of a Lasting Power of Attorney or a court appointed deputy (which would require an application to the Court of Protection)
2) Leaving the tenancy agreement unsigned and reaching a best interests decision that the applicant should be offered a home

What issues and problems have been faced by landlords, the individuals themselves or local authorities?
With the current arrangements do you think the rights of both landlords and occupants are protected as well as they should be?

Answers needed by 23rd October, please. Thanks, Sue Garwood