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Bill puts lawyers in control of transfers

|Written By Helen Burnett

Changes are on the way for the real estate bar as a result of a bill aimed at tackling mortgage fraud that will see lawyers gain exclusive rights to register transfers, but also require them to buy mandatory extra insurance coverage.

Lawyers will get exclusive rights to register land transfers under new legislation from the government of Ontario. Photo by Kirsten McMahon

Bill 152, the Ministry of Government Services Consumer Protection and Service Modernization Act, 2006, aimed at enhancing protections against mortgage fraud, became law last December. Some of the changes set to be implemented in 2007 as a result of the bill include restricting the land titles system so that only lawyers can register transfers and requiring that all transfers involve two lawyers, one for the transferor and one for the transferee.

Clare Brunetta, chairman of the County and District Law Presidents’ Association real estate committee, says the association is pleased with the developments so far.

“By putting lawyers in charge of transfers only, I think the government is recognizing that they’ve got this trained group of professionals there, they’re regulated, they’re insured, and they can take responsibility for protection of the land titles system,” he says.

However, Toronto real estate lawyer and law society Bencher Alan Silverstein says these rules are a crossroads for the profession and need to be cleaned up to be more logical. In particular, he says the two-lawyer rule could cause some concern for consumers.

“That’s where it starts to hurt, because then you’ve got situations where the identical parties on both sides of the transaction, they would need to have two lawyers and pay for two bills,” he says.

For example, Silverstein says if someone wishes to sever part of their land, they would need one lawyer representing them as transferor and one representing them as transferee for the same piece of land.

“I’m really concerned about the two-lawyer rule in every situation because it doesn’t affect lawyers, it affects the consumer having to pay two bills in one situation when you’re in the same party. That hurts, that’s not consumer-friendly legislation.”

The Law Society of Upper Canada notes that exceptions to the two-lawyer rule are still under consideration, and will likely only include same-party transfers.

Brunetta says there has been a lot of discussion about the two-lawyer rule across the province, with many lawyers in larger centres in favour of the change. In smaller centres, he says, many lawyers have always acted on both sides of real estate transactions.

“The fact that we’re going to be changing now the registration to have lawyers only involved in registration of transfers, I think the bar will now be welcoming of the idea that if that’s going to be the case, then we don’t mind having two lawyers in every transaction.

“I think that the bar can see that as a necessary protection with respect to land title fraud and, my guess, is probably prepared to embrace that.”

The law society was soliciting feedback from the profession on the proposed changes earlier this month, as the issue was set to go before Convocation last Friday.

The new legislation also calls for real estate lawyers to pay an additional insurance premium, amounting to an extra $500 per year, which all lawyers intending to practise real estate would be required to purchase.

According to the law society, LawPRO has agreed to provide the coverage and has proposed that the cost be kept to a minimum by excluding certain people from coverage.

These would include those who have been convicted or disciplined in connection with real estate fraud, those being investigated and under an interlocutory suspension order, restriction, or an undertaking not to practise real estate or those who are in bankruptcy.

The increase to insurance rates for real estate lawyers will also likely be accepted by the bar as a necessary element of being the only registers of transfers, says Brunetta.

“Nobody wants to see their costs increase, but at the same time, if the law society or lawyers are going to be responsible for the consequences of title fraud, as a consequence of it only being the lawyers who can register transfers, then I think that the bar recognizes there’s going to be a cost associated with that.”

“There are a lot of repercussions. If we say no to the exclusive registering of the deeds, I’m sure some title insurers will grab the opportunity and we’ll probably be gone in six months. . . . There are lawyers who say . . . they can’t afford the extra insurance premium,” says Silverstein. “But I’m asking, as a profession, can we afford not to say yes?”

“The gut feeling I’ve been getting from people is that yeah, there’s a cost associated with it, but we’re going to be getting the exclusive on the deeds, and it’s the price we’re going to have to pay to be able to get something in return,” he adds.

New due diligence standards are also being created, where, in situations of fraud, only those who have exercised due diligence will be able to receive compensation from the Land Titles Assurance Fund. The law society says that more improvements could be considered for the new standards.

Silverstein says apparently the government wants to get the issue resolved before the end of June.

“I think they want to be able to say they’ve done a good job dealing with real estate fraud, and all of a sudden, we’ve got to make some tough decisions that could affect our future in a very short period of time.

“I hope we’re not sacrificing logic for expediency and that’s what I fear we are going to be seeing happen,” he says.

The profession has only had two weeks to consult on the proposed changes, says Brunetta, but adds that he has not yet received any negative comments from the bar.

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