This week’s article is a request from a managing broker in Prince George on Powers of Attorney.
Due to fraud concerns, the use of a Powers of Attorney in purchases of homes can be quite limited. For example, most institutional lenders now will NOT permit a mortgage to be obtained by way of a power of attorney. Aside from their use for military persons on active duty, the use of a power of attorney for purchase transaction is relatively rare.
Powers of Attorney are still used for sales, often where an elderly parent has transitioned from their fee simple home (often to assisted living).
For licensees, the general guidance from the LPM should be remembered “Whenever any Power of Attorney is contemplated or utilized in a trade in real estate, licensees should advise parties to seek the advice of their respective lawyers as soon as possible to ensure the form of Power of Attorney being used is valid and is acceptable for Land Title Office purposes. (LPM 4(a)(vii))”
It is important that the power of attorney be reviewed by a lawyer prior to a licensee relying on its use, when dealing with Sellers this means getting the power of attorney reviewed prior to activating the listing or otherwise relying on the representations of the purported attorney.
A couple important things to remember about POA’s:
- A POA can only be initially granted by someone who is an adult and competent (capable of making decisions about their financial affairs and understanding the consequences (s.11 POA Act)
- A POA can only be used while the Donor is ALIVE (see Re: Goodwin), after death it is the will that governs and probate must be obtained.
- A POA can be limited to only certain actions (ie; may state “to transfer mutual funds but not real property”)
- A POA in another jurisdiction or province many not be registerable in the BC LTO
- A POA can be limited, enduring or springing
- Enduring – will survive incapacity
- Limited – only for a specific task
- Springing – only effective after a certain event
Read the terms of the POA very carefully!
- A POA can be revoked, however notice of the revocation must be given to the attorney (s.28 POA Act)
I often get asked, how does one know if the person they are dealing with is COMPETANT. The rule of thumb here for a Licensee, is if there is ANY doubt, get a lawyer involved. The lawyer will look to assess the following:
Is the person:
- capable of understanding the nature and consequences of their actions
- do they know the property they have and its approximate value;
- do they know the obligations they owe to their dependants;
- do they understand what they are empowering an attorney to do anything the adult could do with their financial affairs;
- do they understand that if the attorney doesn’t manage the property prudently, the value could decline;
- do they understand that that the attorney might misuse their authority;
- do they understand hat the adult can revoke their power of attorney if capable.