New Power of Attorney Guidelines are Designed to Prevent Fraud

When was the last time you looked at your power of attorney documents?  Can you find the original signed documents?  These legal documents give the person you designate as your attorney the power to handle your property.

But beware of these new rules if you own real estate in Ontario!

It’s important for you to have valid powers of attorney documents for your protection.  Otherwise your family may just be out of luck.  Don’t force them to face expensive alternatives including going to court.

New as of February 2009

Effective February 2009, the Law Society of Upper Canada has issued new guidelines to Ontario lawyers.  These affect the use of powers of attorney (POA) in real estate transactions.

The new rules require lawyers to follow due diligence standards before a POA can be used to sell, transfer or mortgage your property.

POAs are designed to protect you from unnecessary legal expense.

What if, for any reason, you are unable to sign documents on your own behalf and don’t have a valid POA?  Your family may be forced to obtain court orders to deal with your property.

Married Spouses are not automatically authorized

Don’t think that because you are married your spouse can sign your name to legal documents.

You must authorize someone by signing a valid written document designating them as your attorney or substitute decision-maker.  Once you need the POA, it is most likely too late to get one signed.

The Law has Changed

POAs for property, if they were signed before 1995, often required doctors to certify you as no longer competent to manage your own finances.  This would be the trigger that made them operational.

Under the Substitute Decisions Act, 1992 formal assessments of competency are often required.  You cannot expect your family doctor to provide this certificate.

Dangers of Doing-it-Yourself (DIY)

For years, getting a POA document was easy.

Ontario law still does not mandate or require you to use a particular form.  Internet websites allow you to download POA’s in various languages free of charge.

But what seemed once to have been acceptable and standard practice no longer is risk-free.

Why are all do-it-yourself documents dangerous?

How can you tell if you have completed them properly?  DIY documents are worthless if they do not comply with the law.

An Example, Please!

Jonathan brings a homemade power of attorney into a lawyer’s office.

Jonathan says, “My grandfather is now living in a nursing home after his stroke.  His house is empty and I need to sell it to pay for his care.”

What Jonathan doesn’t know is that the power of attorney document was signed in 1995 by his grandfather.  The lawyer must review the document and give a legal opinion that the POA allows Jonathan to do what he wants.

Jonathan needs a legal opinion from his lawyer that the POA meets the current guidelines for real estate transactions.

If the POA does not comply, Jonathan must wait until he is appointed as his grandfather’s guardian of property.  This can take months and cost upwards of $10,000 or more.

New Standards

The POA now has to be registered on the title to the grandfather’s property to be used.

Lawyers now discourage the use powers of attorney for real estate transactions.

Jonathan’s lawyer must confirm that:

• Jonathan is not exceeding his authority under the POA

• there are no restrictions that prevent him from selling grandfather’s home

• the POA was legally authorized and properly witnessed

• the document has not been revoked

• Jonathan is the person he claims to be with proper identification

• where suspicious circumstances exist lawyers are required to investigate further

• what evidence the witness to the POA may have

In Conclusion:

1. Ontario lawyers are now more vigilant because of the frequent use of phony POA’s in real estate fraud.

2. Lawyers now discourage using POA’s for real estate deals because they can be forged.

3. If you have real estate, ensure your powers of attorney have been professionally reviewed.

Check and update your POAs today.  Make sure you meet the new guidelines.

For more information, read my free guide Powers of Attorney: 10 Essentials You Need to Know.

This information is not financial, legal, tax advice or a substitute for professional advice. Always consult with a professional before taking any action.

Ed Olkovich B.A. LL.B C.S. TEP is a Toronto lawyer, certified specialist in Estates and Trusts Law. Ed is frequently quoted as one of Canada’s leading estate experts. He is the author of several books including Executor Kung Fu and Estate to the Heart, both available at EstateTherapy.com or by calling 416.769.9800.