From TitlePLUS Today: Real estate transactions involving powers of attorney
Description of Potential Fraud:
How can real estate lawyers service clients and be alert for possible fraudulent powers of attorney?
In Ontario, the Law Society of Upper Canada’s Guidelines on Powers of Attorney in Real Estate Transactions (the “Guidelines”) are intended to assist lawyers when dealing with powers of attorney in real estate transactions.
The following is a short summary:
- Lawyers should avoid the use of powers of attorney when possible;
- When a power of attorney is necessary for a transaction, the lawyer should prepare it, meet with the donor to review and sign it, and establish the donor’s identity;
- Lawyers for all parties to the transaction should obtain a copy of the power of attorney, ensure that it was prepared and executed in accordance with the applicable legislation and note any restrictions;
- If the transaction is to be title insured, the lawyer should ensure that the title insurer will permit the use of a power of attorney;
- If the transaction includes a mortgage or other encumbrances, the lawyer should ensure that the lender will accept documents signed under power of attorney;
- Before registering a power of attorney, the lawyer for the donee should review it with the donee, obtain the donee’s written approval of its contents and authority to register it, and establish the donee’s identity;
- Lawyers should use their best efforts to register the power of attorney and provide copies to other lawyers involved in the transaction well before closing;
- Lawyers must also comply with the client identification and verification requirements of By-Law 7.1 of the Law Society of Upper Canada; and
- If the lawyer reasonably suspects that he or she would be assisting a client in dishonesty, fraud, crime or illegal conduct, the lawyer must cease to engage in activities that would assist the client in such conduct and, depending on the circumstances, may have to withdraw from representing the client.
See the full Guidelines for details.
Lenders and title insurers may have specific instructions or requirements for transactions to be executed under powers of attorney.1 Lawyers should be sure to comply with these.
For a summary of case law on powers of attorney and solicitors’ liability, see the article by Debra Rolph, LAWPRO’s Director of Research, in LAWPRO Magazine. The article includes “Lessons to be Learned,” for example:
- When acting for a person who is executing a power of attorney, fully explain its consequences to him or her.
- If acting for a client who will benefit from the power of attorney, have the donor obtain independent legal advice.
- Consider making the power of attorney time limited, and its terms no broader than necessary.
- Scrutinize the power of attorney for irregularities on its face. Was it signed by two witnesses? Are there any suspicious circumstances?
Finally, in Ontario, mandatory statements apply to the registration of powers of attorney and documents executed under the authority of powers of attorney. See Ministry of Government Services Bulletin No. 2009-01.
If you are applying for a TitlePLUS policy and have concerns about a power of attorney involved in the transaction, please contact the TitlePLUS Customer Service Centre.