The Question: Can I use a Power of Attorney to buy, sell or mortgage real estate?
The Short Answer: Yes.
The Long Answer: It depends. Let me explain further.
First, the background. A Power of Attorney is a document by which someone appoints another person to act on their behalf. It comes in various forms.
The traditional Power of Attorney we inherited from English law can be used. It can either be a general power where the person appointed can do all manner of things. Or, it can be very specific and restricted to just real estate or just a specific piece of property. The one complicating factor with the traditional Power Of Attorney is that it is null and void if the person who created the document becomes incapacitated.
To deal with that issue, the Government of Alberta enacted legislation that allows someone to create a document that is still effective when the person who made the document is incapacitated. This is referred to as an Enduring Power Of Attorney. It can be done in two different ways. It can be effective immediately and continue on in the event of incapacity or it can only come into effect when the maker is incapacitated. If it is effective only upon incapacity, then a certificate of incapacity must be presented to Land Titles along with the Power of Attorney. Again, this document can be general or specifically to deal with real estate or even more specifically just one particular property.
A Power of Attorney can be used to buy, sell or mortgage real estate with the following caveats.
Care must be taken to ensure the Power of Attorney meets all the requirements. This includes the use of a witness complete with an Affidavit of Execution. Many lenders will insist the Power of Attorney must be prepared and signed in front of a lawyer.
If the purchaser is borrowing money, the mortgage lender will likely have concerns if either the seller and especially if the buyer is using a Power of Attorney. In fact, some lenders, when they send us mortgage instructions specifically prohibit the use of a Power of Attorney by the buyer. If you are contemplating the use of a Power of Attorney when purchasing, make sure you have pre-approval from your lender.
If the purchaser is obtaining title insurance, the insurance company will have additional concerns whether the Power of Attorney is being used by the seller or the buyer. They will not issue the policy until those concerns are addressed. They want to make sure it is a legitimate sale. As a matter of policy, Land Titles will not register a transfer of land where the seller is using a Power Of Attorney and they are transferring the land to themselves.
If you have any further questions or you would like to book an appointment to prepare a Power of Attorney please contact us.