When an individual owns a piece of real estate in Alberta, they own a bundle of real property rights known as fee simple ownership. As the highest form of ownership possible in Canada, the owner has rights over enjoyment, use, income, and sale, all of which make real estate one of the most valuable assets in our lives. There are circumstances however that require an assigning of the authority given to an owner, to a third party for various reasons and using different methods, so let’s consider the basics of these options one by one.
Power of Attorney (POA)
The root meaning of the word attorney is simply an individual granted legal authority to manage legal or business matters on another’s behalf, therefore a Power of Attorney (POA) is a document specifying what powers are given to the attorney. The attorney can be any individual the person assigns the specific powers to and can be for any specified time or limitation indicated in the document since there is no standard POA.
For real estate, the power of attorney must specifically include the authority to make decisions, manage, and dispose of real estate for the party given the authority to be permitted to deal with such assets. The POA is only valid however as long as the individual granting the power of attorney has the mental capacity and physical ability to instruct the attorney. For example, where a person who has the ability to manage her own affairs is on vacation overseas and wishes to grant a relative the authority to sell her property during her absence. Or where a military spouse on deployment grants her spouse a POA to sign documents on the military spouse’s behalf to complete the sale of their home.
There are many scenarios where a POA could be used but the key to remember is the POA must explicitly state the activities they have the authority to conduct, and the person who granted the POA must have the continuing mental capacity and physical ability to instruct the attorney throughout the time where the attorney is dealing with the assets. The POA is null and void during any period where the person that granted the POA is mentally incapable.
Enduring Power of Attorney
The Enduring Power of Attorney bears all the same characteristics of a power of attorney however it is “enduring” because it “endures” notwithstanding the mental incapacity of the person who granted the EPOA. For example, if an adult child of an elderly person is managing their dad’s finances by way of a POA, and their dad suffers a debilitating stroke, the POA automatically becomes legally invalid, and the adult child no longer has the legal authority to manage their father’s financial affairs. If the adult child is managing their dad’s finances by way of an ‘Enduring’ Power of Attorney, the adult child’s authority would continue notwithstanding the dad’s incapacity.
Obviously, a person lacking capacity cannot sign an EPOA so this document must be created and signed before the incapacity of the individual and given a trigger as to when it has legal effect. This trigger is when two doctors declare in writing that the individual lacks the mental capacity to make reasonable judgments regarding financial decisions (although the trigger can be whatever the person granting the EPOA wishes).
The important thing is to understand that a POA becomes invalid when the person granting the authority loses capacity; therefore, any representation agreements would also be invalid on the owner’s incapacity unless they are signed by an attorney appointed under a legally valid, triggered EPOA, and such EPOA is provided to the brokerage.
Legal Will and Probate
So, what happens if an individual has a valid POA and EPOA but the individual who granted the authority, the principal, passes away? You may have guessed it, but the POA and EPOA are immediately invalid, and neither survives the death of the principal. At this stage, the only legal way to represent the “will” of the person who owned the property before death, is by way of a legally valid will. The legally valid will dictates the next steps for the disposal of assets and who has the legal authority to undertake those tasks. The named executor of a legally valid will has the legal authority to deal with the deceased’s assets under the authority of the original will (not a copy).
However, in Alberta, a grant of probate from the Alberta courts must be obtained before the Land Titles Office will allow the Executor of a will to transfer title to real estate interests. Where the deceased died without having a legally valid will – no one (not even the deceased’s spouse or only child) has the legal authority to take any steps whatsoever in relation to the deceased’s estate – including signing a representation agreement - until a grant of administration is obtained from the courts. Issuance of a grant of probate or grant of administration takes months in a perfect situation and can take years in a dispute situation. For this reason, consultation with a lawyer is a must to determine when and how the property can be sold based on the situation at hand.
Although these situations are not overly common, and the examples given only scratch the surface of the complexity of the topic, every REALTOR® will come across all three sooner or later and need to have a basic grasp of what situations the POA, EPOA, and legal will have authority in and when they don’t. When in doubt, speak directly with your broker, or a lawyer for clarity.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619