1. What is a POA? A POA is a legal document wherein the person who gives the POA (the donor) grants another individual (the donee or attorney) legal authority to act on his or her behalf and take certain actions.  The scope of what the attorney can and cannot do must be clearly set out in the POA. In some situations the donor will be uncomfortable in giving a general (unrestricted) POA. In the context of a real estate transaction, I always recommend that the POA be limited so that it can only be used for a specific purpose (i.e. a sale, a purchase or refinancing of a property).  This eliminates the possibility that the POA may be misused or used for a fraudulent or unauthorized purpose. It is also recommended that the POA contain an expiry date.
2. In order to be legally valid, a POA must meet certain criteria. It must be signed by the donor and witnessed by two individuals. There are specific prohibitions concerning who may not be a witness. In addition, if a POA was made outside of the province in which you wish to use it, you should check with a lawyer to see if you need to make a new POA.  Failure to follow the rules concerning execution of the POA may invalidate the POA. It is also important to note that in order to be valid, the donor must have capacity to give the POA.
3. If the POA is being used to buy or sell real estate, the Agreement of Purchase and Sale should make reference to the POA. For example, let’s assume that James and Mary are spouses of one another and are selling a property. Further assume that James is out of the country and unable to sign the Agreement of Purchase and Sale or the closing documents. In that case, James could give Mary a POA to be used solely for the sale of property. In the Agreement of Purchase and Sale, Mary would sign her name as seller and would also sign her name as POA for James. Prior to signing the Agreement of Purchase and Sale, the realtor should confirm that James actually gave Mary a valid POA. The POA should be reviewed (preferably by a lawyer) at the outset to ensure that it is valid and can be used for the sale of the property. Failure to do so, could invalidate the entire Agreement of Purchase and Sale due to a defective POA. It is also recommended that a copy of the POA be provided to the lawyer for both the buyer and seller together with a fully executed copy of the Agreement of Purchase and Sale.
4. If the POA is being used for the purchase of a property and the buyer will be arranging mortgage financing for the purchase, it is important to note that not all lenders will allow the use of the POA for the mortgage. Therefore, although the POA may be used for the purposes of executing the Agreement of Purchase and Sale, the POA may not be used for the buyer to execute the mortgage documents if the lender will not allow it. Some lenders will not allow the use of a POA due to the many instances where POAs have been used for fraudulent purposes.  It is important to give the lender a copy of the POA and obtain the lender’s consent to use the POA at the outset, otherwise the closing could be jeopardized.
5. If the POA is being used for the sale of a property, the donee of the POA should be aware that although it can sign the closing documents to complete the sale, the proceeds of the sale must be made payable to the donor/registered owner of the property. Therefore, arrangements must be made prior to closing to determine how the funds will be provided to the registered owner.

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Most builder Agreements contain a clause which prohibit or restrict the ability of the purchaser to assign the Agreement.  As Assignments are becoming more popular, builders may permit Assignments, however, the purchaser will need to obtain the consent of the builder in order to be able to assign the Agreement.  If the builder grants consent to the Assignment, it will usually require the payment of a fee which can cost between $2500-$5000.  Once it is determined that the builder will consent to the Assignment, the builder will prepare an Assignment Agreement which will need to be signed by all of the parties.

The Assignment Agreement will name the original purchaser from the builder as the Assignor.  The individual who is purchasing from the Assignor will be called the Assignee.  In an Assignment, the Assignee will become the purchaser in the Agreement which the Assignor signed with the builder.  It is therefore important that the Assignee obtains and reviews the entire builder’s Agreement including all Amendments to the Agreement.   I recommend that this be reviewed by a lawyer who is familiar with Assignment transactions.  In addition to the builder’s Assignment Agreement, a separate Assignment Agreement is usually made between the Assignor and the Assignee.

Assignment Agreements are not straightforward and need to be carefully prepared and reviewed.  I always recommend that an Assignment Agreement always contain two important clauses.  First, the Assignment Agreement needs to be made conditional on the review by the lawyer for the Assignee and the Assignor.  Second, the Assignment Agreement should be conditional on the builder granting consent to the Assignment.

The Assignment Agreement will need to address how and when the deposits and profit will be paid to the Assignor.  Most Assignment Agreements provide that the Assignor will receive the deposits that were paid to the builder at the time when the builder grants consent to the Assignment.  Payment of the profit, (the difference between the assignment price and the original purchase price with the builder) may not be paid by the Assignee to the Assignor until the Assignee closes its transaction with the builder.  This is because the Assignee may not be able to pay the profit until such time as it obtains its mortgage funds from its lender which will not happen until its closing with the builder.

In most cases, the Assignor will be responsible for payment of the Assignment fee to the builder.  The Assignee, however, will usually be responsible for paying any of the builder’s adjustments on closing such as utility meter installation, development charges, levies, etc.  In addition, if the Assignee does not qualify for the HST rebate, this rebate will be an additional charge that the Assignee will be responsible to pay on the final closing with the builder.

Drafted properly, Assignment Agreements can be beneficial for both the Assignor and Assignee.  By assigning the builder’s Agreement prior to closing, the Assignor can avoid closing and paying the builder’s adjustments as well as Land Transfer Tax.  The Assignee can purchase a property at an advantageous price in comparison to similar properties and may be able to view the actual property rather than buying from a set of builder’s plans.

In my experience, many lawyers and realtors are unfamiliar with Assignment Agreements.  Therefore, if you are representing an Assignor or Assignee, it is important to have the Assignment Agreement reviewed by a lawyer who is familiar with Assignments.

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