Power of Attorney 101
Sometimes situations are encountered where clients are away at the time of closing a real estate transaction, and therefore, unable to sign the legal documentation. In these situations, one way to ensure that the transaction closes on time is by using a Power of Attorney (POA). However, a few years ago, the Law Society of Upper Canada tightened the rules pertaining to the use of a POA for real estate transactions due to a high incidence of fraudulent activities. For example, forged POA’s have been used to fraudulently mortgage properties or transfer title out of the legally registered owner’s name, as was the situation in the case of Reviczky v. Meleknia, 2007 CanLII 56494 (ON S.C.). As a result of fraudulent circumstances such as these, it has become rather uncommon to see a POA being used. If the person relying on the POA cannot provide satisfactory evidence that the POA is valid and enforceable, a buyer/seller, his/her lawyer or the lender could refuse to close the transaction.
A POA for property refers to a written legal document which authorizes one person (the “attorney”) to make legal decisions regarding another person’s (the “grantor”) financial affairs and property. This document can be general or specific in nature in relation to the scope of the authority that is given to the attorney, or any specific conditions or limitations that are imposed upon them.
In Ontario, individuals are permitted to appoint any person over the age of 18 (they do not have to be a lawyer) to act as an ‘attorney’ for property. An attorney for property can effectively act for an individual in relation to financial dealings, including but not limited to, banking, paying bills, signing cheques, and buying or selling real estate or consumer goods. There are two things which are strictly prohibited for an attorney for property to do on another individual’s behalf: appoint a new POA for property, or create a Last Will and Testament.
There are two main types of POA for property: continuing (enduring) and non-continuing (general or non-enduring). A continuing POA for property will continue in full force and effect even if at some point in the future, the grantor should become somehow mentally incapacitated, and therefore, unable to make decisions on their own behalf. A non-continuing POA, as the name suggests, would not continue in the same effect. If the grantor were to become incapacitated, the POA would be subsequently discontinued. This type of document is often used for a limited time period and often for a specific purpose, such as enabling your attorney to complete legal paperwork for the sale of your property if you are unable to be present to complete the paperwork on your own behalf, for example, if you were out of the country at the time of closing.
Procedural and legislative requirements when using a POA to sell land
When using a POA for the purchase and sale of land it is important to understand the various requirements that must be adhered to, as many problems can arise as a result of omissions by real estate agents in this regard. The purpose of these requirements is to ensure that the documents involved with the real estate transaction have been executed properly and that they accurately reflect the existence of a POA. The agent must ensure that the agreement of purchase and sale contains a signature line that is signed by the attorney with a brief sentence underneath indicating their status as the attorney, giving them authority to execute the document.
The Land Titles Act, R.S.O. 1990, c. L.5 and the Registry Act, R.S.O. 1990, c. R.20 both contain certain registration requirements that must be adhered to. This legislation identifies the need to register the POA on title (or provide a notarial or certified copy of it). In order to register the POA you must go to the appropriate registry and pay the registration fee, or ask your solicitor to do it through the electronic registry system. Currently, at the Simcoe Land Registry Office the fee is $70.00 to register a POA under the Land Titles Act, and $60.00 to register a POA under the Registry Act. These Acts also discusses how to revoke a POA. The revocation must be registered or evidence must be filed with the land registrar showing that the POA is no longer in force.
It is also important to note that some lenders will no longer allow mortgages to be secured and signed by a POA under certain circumstances and the requirements of each lender can differ. As a result, real estate agents must take the necessary steps to find out the specific requirements and potential limitations that exist in relation to each of the lenders. Unless the POA specifies that it is meant to form a continuing/ enduring relationship, a POA that deals specifically with real estate is only valid for three years from the date of signing.
Another important rule relates to signing the document; it is required by law to have two witnesses present at the same time in order to witness the grantor signing, and to sign the document themselves. However, if the witness is a lawyer or notary public, only the one witness is required while the grantor signs the document. There are also certain restrictions on who can act as a witness. The following people cannot be a witness for a POA for property: your spouse, partner or child, anyone under the age of 18, or anyone who has a ‘Guardian of Property’ or ‘Guardian of Person’ appointed for them by a court because they are deemed to be mentally incapable of managing their own personal property and/or health care decisions.
The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.
