Mr. Bob Aaron, another real estate practioner in Toronto, has written a brief summary of a case involving a fraudulent Power of Attorney (or POA). Any home owner, potential buyer or seller, should consider what he has said in his article.

The easiest solution is simply to avoid using a POA. Rather than giving a POA, the price of simply meeting with another lawyer to witness signatures in whatever jurisdiction is roughly the same. If you insist on giving someone a POA, it's best to ensure that it is prepared and witnessed by a lawyer. If you are using it to buy, sell or refinance real estate, make sure that your agent and lawyer know about it up front at the beginning of the transaction so that the appropriate documents can be prepared and the proper steps are taken.

Real estate fraud involving fraudulent POAs is a legal challenge. In a previous case, CIBC Mortgages Inc. v. Chan, the court found the mortgage to be fully enforceable upon registration, even though there was fraud. Prior to this 2005 case, fraudulently registered documents were generally held to be of no force or effect. There is a much longer and complex analysis regarding the previous law, but I will not get into it here.

Some legal analysts believe that CIBC Mortgages Inc. v. Chan should be considered an exception to the general rule of mortgage fraud since its fact scenario is odd. In that case, Ms. Chan forged her husband's signature on a Power of Attorney and refinanced their home with it in order to fund her gambling addiction. Mr. Chan had no knowledge of the refinance or her addiction until enforcement proceedings had begun. Strangely, Mr. Chan allowed Ms. Chan to remain on the property.  In effect, Mr. Chan, who had received no benefit from the refinance claimed fraud by his wife. The ruling was perhaps one of practicality: It would be problematic for lenders to effectively enforce their mortgages if the court rules in the Chans' favour.

Mr. Aaron's reported case changes things slightly. In that case, the court found that one of the true owners of the property had received a benefit by way of a discharged prior mortgage and the mortgagee was entitled to recover the amount paid to discharge the past mortgage.

If you are concerned about title fraud, you may wish to consult with your lawyer about title insurance options or perhaps subsearches of your property. Many lawyers can give you up to date information about your property and while the cost varies from lawyer to lawyer, it shouldn't cost much more than a trip to the dentist.

        

 

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