Powers of Attorney Can Be Tricky #532
Licensees must be aware of the challenges that exist when representing someone who claims to have the legal right to act on behalf of a property owner on the basis of a power of attorney. Is the power of attorney valid? Was it properly executed? Does it empower the attorney to deal with real property? Has it expired? Has it been revoked? Has it been terminated through the death of the grantor? These are all questions that must be ascertained by the licensee before proceeding.
In 2018, two licensees were approached by Seller A wishing to list a property for sale. A title search revealed that the property was owned jointly by Seller A and their spouse, Seller B. Seller A advised the licensees that Seller B was confined to a care home and Seller A had a power of attorney (POA) to act on Seller B's behalf. The licensees had never dealt with a POA before, and they generally took Seller A's assertion at face value. They did review some 2009 correspondence from Seller A's lawyer indicating there was a POA between Seller A and Seller B. However, the licensees did not obtain a copy of the POA for the deal file, a contravention of their local Board's MLS® Regulations regarding listing properties where POA's were involved. They also did not advise Seller A to seek independent legal advice to ensure the POA was valid. It appears that the licensees did not read, or did not understand, the POA or the lawyer's correspondence, which clearly indicated that the POA gave authority for Seller B to act for Seller A, rather than the other way around.
The two licensees marketed the property and eventually received an offer to purchase from a buyer, which was accepted by Seller A in their own right and as the attorney for Seller B. Subjects were removed and the transaction was slated to close on April 19. On April 4 the conveyancing lawyer for the sellers advised the licensees that a copy of the POA was needed to complete the transaction. Seller A finally provided the lawyer with a copy of the POA on April 10. The lawyer immediately realized that the POA did not provide Seller A with the authority to act for Seller B. The lawyer attempted to save the transaction by getting Seller B to consent to the transaction in their own right but discovered that Seller B did not have the legal capacity to sign the required legal documents. The transaction could not be completed. As a result of the failure of the transaction, Seller A defaulted on the purchase of another property which they were intending to acquire with the proceeds of the failed transaction.
The buyers lodged a complaint with the Real Estate Council of BC (Council), concerning the actions of the two licensees. The licensees were found guilty of failing to take sufficient care to ensure that Seller A had the legal authority to sell the property and failing to advise Seller A to seek independent legal advice concerning the POA. The licensees were fined $20,000 plus costs, a substantial penalty.1
In addition to their transgressions regarding the POA, the licensees were found to be in contravention of Rule 3-2 by failing to promptly provide to their managing broker all documents relating to the transaction (they waited 8 days before filing the subject removal document) and by failing to keep their managing broker informed of the real estate services they were providing (they waited 10 days before advising their managing broker that there was a problem with the POA that might result in the transaction not completing). I mention these last two contraventions because I am seeing them creep into more and more discipline decisions. Licensees must be aware of and comply with Rule 3-2, which requires them to promptly file documents with their brokerage and keep their managing broker informed of the real estate services they are providing. Yes, I know licensees are independent contractors. Yes, I know they conduct much of their business electronically. Yes, I know they don't visit the brokerage as often as they used to. However, none of that absolves a licensee of their obligations under Rule 3-2 (1) and (2) to promptly provide their managing broker with the original or copies of all necessary documents and keep their managing broker informed of the real estate services they are providing. As you can see from this case, 8 days is not considered prompt.
It is instructive to note that the licensees had not encountered a POA before this transaction. However, ignorance is no defence. If a licensee does not think they have the skill and expertise to conduct a transaction, they should refer it to a licensee that does. If they do not refer it, they must take steps to acquire the necessary knowledge to enable them to act with reasonable care and skill. There are tremendous resources available from Council, BCREA, local Boards and Associations, brokerages, managing brokers and more experienced licensees. Licensees are obliged to take advantage of those resources.
|1.||RECBC decision published October 7, 2020 GWH and KM, representatives, Royal LePage Kelowna, Kelowna.|
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