Law Times

PAGE 12 FOCUS JUNE 16, 2008 / LAW TIMES New power of attorney requirements in effect BY HELEN BURNETT Law Times part of the government's plan to combat real estate fraud are now in effect, which lawyers are calling a step in the right direc- tion to reducing occurrences of fraud in this area. As part of the Ontario Min- N istry of Government and Con- sumer Services' real estate fraud action plan following the legisla- tive amendments of Bill 152, as of April 7, there are new registration requirements for powers of attor- ney and any documents registered under the authority of a power of attorney, which now have to be scanned and registered. The registration requirement calls for a "law statement" when an individual registers any docu- ment under the authority of a power of attorney. In these cases, a lawyer will be required to dis- cuss the power of attorney with their clients and provide the nec- ew requirements for registering powers of attorney in Ontario as essary law statement. Law state- ments are not required when documents are signed under the authority of a power of attorney given by a corporation or a bank, but the attorney will be required to make a statement that they are acting within the scope of the power of attorney. The requirements also call for the original signed and wit- nessed power of attorney to be scanned and electronically regis- tered, as well as revocations of a power of attorney. The introduction of the TPLawTimeHPColour 10/19/06 4:22 PM Page 1 new requirements comes a few months after a notable court de- cision in the province, involving a fraudulent power of attorney. As reported in Law Times, the Ontario Superior Court ruled in December in the case of Revic- zky v. Meleknia that a 90-year- old North York man was not responsible for a mortgage that was taken out on his investment property after it was sold using a fraudulent power of attorney. Justice John Macdonald con- cluded that a solicitor obtained Bob Aaron says the moves have made it more difficult to carry on a transaction with a power of attorney. by HSBC "did nothing to scru- tinize the power of attorney," which was notarized by a To- ronto lawyer and used to sell the property to another party. The decision notes: "Review of the power of attorney prior to closing therefore would have led to several questions about its valid- ity. If the fraudster were questioned about the validity of the power of attorney through his solicitor, he likely would have abandoned the fraudulent scheme, to avoid ap- prehension and prosecution. Al- ternatively, if Mr. Reviczky were questioned to determine whether he was alive just prior to closing, whether he had revoked the power of attorney or whether he was men- tally competent at relevant times, its invalidity would have been re- vealed. In either case, the bank would have avoided the fraud. "The bank had the opportunity to avoid the fraud . . . It dealt with the fraudster and, whether through its solicitor or otherwise, it did not take steps to scrutinize the power of attorney. The bank chose to put itself in proximity to the unknown fraudster in this transaction by dealing with him, yet it failed to make use of the opportunity to avoid the fraud, which that prox- imity gave it." At the time, Toronto real estate lawyer and law society bencher Bob Aaron told Law Times that, "The decision is going to have an enormous impact on how banks, real estate agents, lawyers, buyers — basically all industry stake- holders — treat any transaction involving a power of attorney." The decision in Reviczky was also the first to interpret the 2007 Ontario Court of Appeal ruling in Lawrence v. Maple Trust Company, a mortgage fraud case which reas- serted that the principle of deferred indefeasibility accords with the Land Titles Act. The case involved a Toronto homeowner, who was the victim of an imposter who gave a lawyer a forged agreement of pur- chase and sale on her home, under the terms of which the property was to be sold to another impos- ter. A mortgage application was approved on the property, and a fraudulent transfer of property was later registered. Clare Brunetta, chairman of NICE BACKYARD. Too bad their neighbours have as much right to it as they do. the real estate issues group with the County and District Law Pres- idents' Association and a member of the law society's real estate is- sues working group, says that the power of attorney issue is some- thing that the law society working group is continuing to work on this year. "Powers of attorney, as every- body knows, have been one of the areas that have provided fer- tile ground for fraudsters, so we're trying to respond at this point by making the power of attorney process more effective so they have to be registered and in document form," he says. This will result in, at the very least, the lawyer who is acting for the purchaser being able to see that power of attorney and examine it, whereas, before, that opportunity didn't necessarily exist, says Brunetta. "We're trying to encourage lawyers to register those pow- ers of attorney early in the pro- cess, not last minute, so that if there are issues or questions, the solicitor for the purchaser has time to investigate those things, and to make the original pow- ers of attorney available as well if requested, and they should be requested," he says, to make sure that they meet the standards that they should. "These are all I think steps in the right direction to trying to reduce the opportunities for fraud," he says. Aaron tells Law Times that there are now statements that have to be made which will require a little more due diligence than lawyers were exercising before. "Now the powers of attorney title insurance.* Protect your clients. Recommend TitlePLUS® TitlePLUS title insurance and you, together we make real estate real simple. Visit titleplus.ca or call 1-800-410-1013 for more information. *Underwritten by Lawyers' Professional Indemnity Company (LAWPRO® ). Contact LAWPRO for brokers in Manitoba, Saskatchewan and Alberta. ®Registered trademark of Lawyers' Professional Indemnity Company. are going to have to be registered in electronic format so the lawyer on the other side of the transaction will actually see it," he says. "That's good too, so that there's another opportunity for a defective power of attorney to be caught. I'm not sure that it will frankly do much to stop fraudulent powers of attorney," says Aaron. These moves have made it more difficult to carry on a trans- action with a power of attorney, he says. "In many circumstances now, banks will not allow mort- gages to be signed by powers of attorney unless there's special cir- cumstances that have to be ap- proved by the bank." LT www.lawtimesnews.com

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