Powers of Attorney: A Minefield for REALTORS® #568
CATEGORY: Legally Speaking
TAGS: Foreign Power of Attorney Fraud Identity Fraud Land Title Act Power of Attorney
REALTORS® will, from time to time, encounter clients who are buying or selling real estate through a power of attorney. While seemingly straightforward, powers of attorney are nothing short of legal landmines and should be treated with extreme caution. REALTORS® should be aware that not all powers of attorney are created equal, and care must be taken to ensure that a power of attorney is valid for the real estate transaction being contemplated. Powers of attorney that do not grant the requisite authority to deal with the subject property or are otherwise invalid may result in very unhappy clients, collapsed transactions, legal battles, and costly regulatory penalties.
Not all Powers of Attorney are the Same
There are generally three main types of powers of attorney:
- specific or limited powers of attorney,
- general powers of attorney, and
- enduring powers of attorney.
A specific or limited power of attorney will restrict an attorney’s authority for a specific transaction, property, purpose, or time frame. A general power of attorney grants broad powers but ceases to be valid when the grantor becomes incapable. On the other hand, an enduring power of attorney will continue to operate beyond a grantor’s mental incapacity. Regardless of the type of power of attorney a REALTOR®may be dealing with, they should take reasonable steps to satisfy themselves that the person they are dealing with has the requisite authority to act and that the power of attorney is valid before proceeding.
A Complicated Task: Determining Authority and Validity
REALTORS®are required to take sufficient care to ensure that they are dealing with a person who has the authority to act. The scope of authority granted by a power of attorney is defined by the Power of Attorney Act1 and the terms of the power of attorney itself. When a client is acting through a power of attorney, REALTORS® should obtain a copy of the power of attorney and carefully review it to determine whether it limits or restricts the authority granted in a material way.2 Similarly, REALTORS® should be aware that relevant legislation may circumscribe the authority of a power of attorney. For example, Section 56 of the Land Title Act.3 stipulates that a power of attorney expires three years after the date of its execution with respect to transactions affecting land, unless it is an enduring power of attorney or the operation of Section 56 of the Land Title Act has been specifically excluded.4
Many other factors may affect the validity of a power of attorney. Has the power of attorney been revoked?5 Is the power of attorney properly executed and witnessed pursuant to Part 5 of the Land Title Act and Sections 16, 17, and 17.1 of the Power of Attorney Act? Has the power of attorney been terminated with the death of the grantor?6 Is the power of attorney in a form acceptable to the Land Title Office?7 These are complex questions that should be answered before a client contracts with a power of attorney, to purchase or sell real estate.
Foreign Powers of Attorney
REALTORS®should take extra care when dealing with a power of attorney from outside of British Columbia. While Section 38 of the Power of Attorney Act provides that an extra-jurisdictional power of attorney may be deemed to be an enduring power of attorney in British Columbia if it complies with very specific prescribed requirements, the risk of an extra-jurisdictional power of attorney not being recognized in British Columbia is high.8 If Section 38 of the Power of Attorney Act is to be relied upon, it should be done with legal advice.
An Important Note on Fraud
Fake powers of attorney have been linked to many fraud claims and are increasingly becoming more difficult to spot. Recently, a number of real estate professionals were ordered to pay over $275,000 in penalties and enforcement expenses for their roles in a transaction where a “seller” used a fraudulent power of attorney to sell the subject property. Hence, REALTORS®should be aware of possible red flags that a fraudulent power of attorney is being used. Possible red flags include an overseas seller, a high degree of urgency regarding the sale, a willingness to sell for less than market value, and a client with little to no knowledge of the subject property. REALTORS®should also carefully examine the power of attorney for inconsistencies and be on the lookout for other red flags of possible fraud or misuse. When acting for a seller through a power of attorney, consider whether confirmation from the grantor is possible, and be skeptical if there is no reasonable explanation as to why such confirmation isn’t possible. REALTORS® should also use their professional judgment to assess whether any potential red flags trigger their obligation to file a Suspicious Transaction Report (“STR”) with the Financial Transactions and Report Analysis Centre of Canada (“FINTRAC”).
Joint or Joint and Several?
Pursuant to section 18 of the Power of Attorney Act, if all or part of the authority is granted to more than one attorney, the attorneys must act unanimously in exercising that authority unless the power of attorney specifies circumstances in which the attorneys do not need to act unanimously or explains how conflicts are to be resolved.9 Hence, in assessing whether their clients have the requisite authority to act, REALTORS® should consider whether the language in a power of attorney permits attorneys to act separately (i.e. joint and several powers) or requires attorneys to act jointly (i.e. joint powers only). If the language of a power of attorney requires attorneys to make decisions together, REALTORS® should take care to ensure that all required attorneys sign documents on behalf of the grantor and that they confirm and document instructions received from all required attorneys.
Tips on How to Deal with Powers of Attorney
Needless to say, powers of attorney are complex legal documents with many potential pitfalls and REALTORS®would be wise to consider the following tips when dealing with a power of attorney.
- Ascertain the identities of your client(s) early and ensure that the name on the power of attorney matches exactly with that of the seller or buyer.
- Obtain a copy of the power of attorney and review it carefully to determine the extent of the authority granted and its validity. Remember to retain a copy in your file.
- Consider whether the language in the power of attorney requires multiple attorneys to act jointly or whether attorneys can act separately. If attorneys are required to act jointly, REALTORS® should be mindful that the attorneys must act unanimously.
- Consider advising your clients to obtain legal advice regarding using a power of attorney before contracting to purchase or sell property. This is particularly important when dealing with a power of attorney executed more than three years ago or from a jurisdiction outside of British Columbia.
- Be aware of any limitations on the authority granted through the power of attorney. For example, unless the power of attorney is enduring or the operation of section 56 of the Land Title Act is specifically excluded, it may be invalid for land title purposes.
- Be generally aware of the factors that could affect the validity of a power of attorney, including when a power of attorney is revoked or terminated and potential defects that could cause the Land Title Office to reject its registration. While REALTORS® should seek to identify potential issues in this regard, REALTORS® should refrain from providing their clients with legal advice. Instead, advise your clients to seek independent legal advice regarding the power of attorney where appropriate and particularly if you are in doubt.
- Be on the lookout for indicators of potential fraud. Consider verifying the power of attorney with the actual seller or buyer, if possible. Be skeptical if there is no reasonable reason why such confirmation cannot be made.
Given the potential complexities involved, REALTORS®should consider seeking the assistance of a lawyer regarding the above.
There is little question that powers of attorney are complex legal documents, and REALTORS®should treat them with extreme caution. Failing to take adequate steps to ensure that a power of attorney is valid and that the person you are dealing with has the necessary legal authority to deal with the subject property can lead to potential legal liability, unhappy clients, costly legal battles, and significant regulatory penalties. REALTORS® should also be aware that while this article intends to highlight some general considerations regarding the use of powers of attorney, it is not intended to be exhaustive or a definitive guide. There can be many other possible considerations, and REALTORS® should always use their professional judgment in determining whether they have the necessary skill and expertise to conduct a transaction with reasonable skill and care. For more information regarding powers of attorney, REALTORS®are encouraged to contact their managing brokers and take advantage of the resources available with the British Columbia Financial Services Authority’s Knowledge Base.
|Power of Attorney Act, [RSBC 1996] c. 370.
|See Brian Taylor’s Legally Speaking article “Powers of Attorney Can be Tricky #553” where two REALTORS® misunderstood the authority granted by the subject power of attorney.
|Land Title Act, [RSBC 1996] c. 250.
|Subject to the provisions in s.56(2) and (5) of the Land Title Act, [RSBC 1996] c.250.
|Pursuant to s.28 of the Power Attorney Act, [RSBC 1996] c.370, a grantor can revoke an enduring power of attorney by way of written notice to the attorney(s). Similarly, s.57 of the Land Title Act, [RSBC 1996], c.250 stipulates that a power of attorney that has been filed with the Land Title Office may be revoked by filing a notice of revocation or evidence “sufficient to effect revocation.”
|S.30(4) of the Power of Attorney Act, [RSBC 1996] c. 370.
| An original or certified true copy of the power of attorney must be filed with the Land Title Office in order to be effective for land purposes. According to the Land Title Office, some common defects which can cause a power of attorney to be rejected for registration include variations between the name of the grantor in a power of attorney and the name of the registered owner, a power of attorney that has not been properly signed or witnessed, a power of attorney that contains substantive differences in alternate names for the attorney, and foreign powers of attorney that is not accompanied by an extra-jurisdictional certificate as required pursuant to s.4 of the Power of Attorney Regulation B.C. Reg 20/2011.
|For a foreign power of attorney to be recognized in British Columbia, it must comply with prescribed requirements, including specific residency requirements. See s. 4 of the Power of Attorney Regulation BC Reg 20/2011 regarding extra-jurisdictional power of attorneys.
|This generally does not apply when the additional attorney is an alternate attorney who can act only when specific conditions have been met.
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