Power of Attorney in Quebec Mortgage Transactions
The power of attorney is a common and useful legal instrument that allows a person, the mandator, to entrust another person, the mandatary, with the power to act on their behalf for specific legal acts. Governed by articles 2130 to 2165 of the Civil Code of Quebec under the rules of mandate, a power of attorney is a convenience tool used when the mandator is capable but cannot be physically present. In Quebec mortgage matters, a power of attorney can be used when the borrower cannot appear at the notary's office for the signing of loan documents, for example due to a business trip abroad, hospitalization, extended stay outside the province or logistical constraints.
General and Special Power of Attorney
- General power of attorney
- A general power of attorney grants broad powers to the mandatary to perform all acts of current administration on behalf of the mandator. However, in mortgage matters, this form is often deemed insufficient by lenders who require a document precisely identifying the authorized transaction. General powers do not necessarily cover acts of disposition such as constituting a mortgage.
- Special (or particular) power of attorney
- A special power of attorney grants powers limited to a specific and determined act. It clearly identifies the property concerned, the lender, the loan amount, the main conditions and the specific authorized transaction. This is the recommended form and most often required by lenders for mortgage transactions, as it offers the best legal security.
Lender Acceptance and Policies
Acceptance of powers of attorney varies significantly among financial institutions, and this verification is a critical step in the process. Major Canadian chartered banks (RBC, TD, BMO, NBC, Scotia, CIBC) are generally restrictive and may refuse powers of attorney for mortgage transactions, particularly for new loans and acquisitions. Their anti-fraud policies favour the borrower's physical presence. Desjardins credit unions have their own policies that vary by local credit union. Alternative lenders and private lenders are generally more flexible in their acceptance of powers of attorney, but still require a specific notarized document.
Best Practices and Recommended Process
- Verify the lender's policy in advance: Before submitting the file, confirm with the selected lender whether they accept powers of attorney for the intended transaction type. Obtain this confirmation in writing if possible.
- Have a special notarized power of attorney drafted: The power of attorney must be drafted by a notary as an authentic act. It must precisely identify the property, lender, amount, loan conditions and authorized transaction.
- Confirm the mandator's identity and capacity: The notary receiving the power of attorney must verify the mandator's identity and ensure their legal capacity (aptitude) at the time of signing. This verification protects against fraud risks.
- Transmit the power of attorney to the officiating notary: The original power of attorney must be transmitted to the notary who will proceed with the mortgage signing. The notary will verify the document's conformity and the validity of the granted powers.
- Have an alternative plan: If the lender refuses the power of attorney, plan alternatives: postpone signing to a date when the borrower will be present, video conference signing if the lender and notary permit it, or change lenders.
Fraud Risks and Precautions
The power of attorney is an instrument that can be used for fraudulent purposes, which explains lender caution. Risks include identity theft of the mandator, creation of false powers of attorney, use of a power of attorney after the mandator's death or incapacity, and unauthorized transactions exceeding the power of attorney's scope. To mitigate these risks, notaries apply rigorous verification procedures including identity confirmation through official documents, mandator capacity verification and validation of the scope of powers. The mortgage broker must be vigilant in any unusual situation and report any concerns to the notary and lender.
Technological Evolution: Remote Signing
Technological evolution and recent regulatory changes offer new alternatives to the traditional power of attorney. Since adaptations introduced during the COVID-19 pandemic, certain Quebec notaries can receive acts by video conference under certain conditions. The Chambre des notaires du Quebec has established guidelines for remote notarial signing. This option, when available and accepted by the lender, can constitute a preferable alternative to a power of attorney, as it allows the borrower's virtual presence and eliminates the risk associated with using a third-party mandatary.