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LawPro's real estate transaction levy has it right

|Written By Gary Lloyd Gottlieb

Iam not an apologist for the Law Society of Upper Canada or LawPro, but I amsurprised at the letters I periodically receive from solicitors bellyachingabout the real estate transaction levy. Their criticism of the levy is illconceived.

In June 1994, Convocation established a task force to deal with an insurance deficit of $154 million and to examine the nature of the law society's errors and omissions insurance program. One of the task force's recommendations that was implemented was the real estate transaction levy, which currently is $50 per transaction.

A recent letter summed up the complaint. The writer lamented that the insurance crisis is long past, yet the levy continues, and he said he has no explanation for his clients as to why the surcharge exists.

Lawyers may criticize the law society and LawPro for many things, but the real estate transaction is not one of them. In the first place, on a real estate purchase that is title insured, the transaction is exempt from the levy. Apart from that, title insurance makes economic good sense, both for the client and the lawyer. The cost of title insurance is often offset by the saving on other disbursements (there is usually no need for a tax certificate and building department clearance letter, etc., in most residential purchases) and generally transfers the risk of a claim against the lawyer's own negligence insurance to the shoulders of the title insurer.

Secondly, the money received from the real estate transaction levy enables negligence insurance premiums to be lower than they would otherwise be.

Finally, when the transaction levy must be paid, for example on sale transactions, it can be charged as a disbursement to the client.

I corresponded with Michelle Strom, LawPro's president and CEO, about this topic.

She pointed out that revenue from transaction and claims history levy surcharges represent about 30 per cent of LawPro's revenue for the mandatory negligence insurance program. Transaction levies ensure an element of risk rating in the program, as real estate and civil litigation represent a disproportionate risk when compared with other areas of practice.

Real estate claims last year represented 30 per cent of the claims costs of the Ontario program. Without the benefit of transaction levies, base premiums of $7,900 would have to be charged to real estate lawyers, compared with the present $2,625.

The use of transaction levies avoids the dislocation that would occur if base premiums were increased to reflect the risk. Transaction levies are an equitable way to achieve risk rating in the insurance program.

For solicitors who rely on ordinary real estate transactions as the backbone of their practice and struggle to survive, pointing the finger at LawPro's real estate transaction levy is fingering the wrong culprit. This is one instance where it would be more appropriate to point the finger at ourselves.

We have allowed the ordinary real estate transaction to become a commodity rather than a service. Competition has become based on the amount of the fee charged rather than the quality of the personal service rendered.

The suggested fee schedule of the Toronto Lawyers Association provides a fair and reasonable guideline for real estate transactions, yet how many lawyers in the Greater Toronto Area use it as a guideline? The conscientious handling of a real estate transaction involves counselling and advising one's client, not only doing the work itself properly, yet a commoditized fee, set in advance, does not permit this.

Litigation lawyers, especially good ones, understand the folly inherent in the commoditization of legal services, but the real estate bar has failed to come to this realization.

One thing I have learned in 35 years as a lawyer and 10 years as a bencher is that the law society will not be the saviour of the profession, particularly sole practitioners and small firms for whom real estate is a linchpin of practice. Our only saviour will be ourselves, and that involves a change of mindset and charging what our services are truly worth.

Keeping time dockets for yourself on real estate transactions, requiring your staff to do likewise, and dealing personally with your clients, giving them the counselling and advice they should have, will be a good impetus to start charging what your services are worth and to disregard the skimpy fees charged by the mass production artist down the block.

Gary Lloyd Gottlieb, a Toronto sole practitioner, is a Law Society of Upper Canada bencher. His e-mail address is glgqc@interlog.com

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