As restrictions lift, lenders are reinstating some in-person requirements, says real estate specialist
Virtual real estate closings grew in popularity in Ontario when the COVID-19 pandemic led to restrictions on in-person contact. However, they’re still not as prevalent as face-to-face meetings between lawyers and clients, despite the widespread availability of technology, says certified real estate specialist Mark Giavedoni.
The Ontario government allowed real estate documents to be signed electronically beginning in July, 2015, but due to several factors, the practice wasn’t common, said Giavedoni, a partner at Gowling WLG in Hamilton and real estate co-chair of the Federation of Ontario Law Associations.
“Real estate was not made for virtual closings prior to COVID,” he says, because of historical practices; a mistrust of technology by lawyers, regulators, institutions and some clients; regulatory/statutory requirements; third parties who required wet signatures; and a “lack of widespread, trustworthy technology to accommodate virtual closings.”
“Part of the real estate process involves meeting with your clients and verifying their ID and who they are and that they are willingly entering into the transaction, well advised, and based on their signed agreement. This was not really something that could be done until the pandemic forced changes to habits, customs and the law,” Giavedoni says.
“Since COVID, virtual closings are much more popular and prevalent, but I am hesitant to say it is yet the norm – for now.”
He says law firms with more than five lawyers are more inclined to use virtual closings “likely because the technology infrastructure is in place more readily.”
Obstacles to virtual closings include clients who aren’t comfortable carrying out a real estate transaction remotely, he says, and third parties such as mortgage lenders or government agencies that will often require wet signatures or an attestation that the lawyer met with the client in person to confirm their identity.
“During COVID, most lenders relaxed some requirements, but many have reinstated them now that restrictions have been lifted,” Giavedoni says, adding that the province also amended several statutes to allow certain remote activities, including commissioning oaths or swearing affidavits.
“Each real estate transaction has a requirement for delivery of a sworn statement and, before the legislative amendment, that necessitated a face-to-face encounter to administer the oath. So really, prior to the legislative amendments in 2020-21, a truly complete virtual real estate transaction was not possible if the goal was to complete it in accordance with the legal parameters in place.”
Lawyers conducting real estate closings remotely need to ensure that the software they’re using addresses “all the typical requirements of an in-person meeting,” Giavedoni says. Considerations include “the ability to sign, deliver and verify documents; a means to view ID documents; a means to hear and see the parties, ideally simultaneously; and to effect the registration in accordance with regulatory requirements, including retention of documents.”
Companies such as Deeded.ca and MyClosing.ca have also begun competing with lawyers who offer virtual closings. Known as “e-lawyers,” the companies offer business tools created by some lawyers who tend not to practise from brick-and-mortar premises and provide legal advice via an online platform.
Giavedoni says while he’s not aware of any concerns about the standard of practice with such sites, “I suppose there is a possibility that the lawyer facilitating these based on such a website could be situated anywhere and possibly could be from anywhere.”
Even when in-person closings occur, he says, “there is already a practical concern that some lawyers have a clerk or assistant prepare the closing documents and have them meet with clients to sign, which is contrary to Law Society of Ontario requirements. There may be a heightened risk that this practice can more easily happen unchecked in a virtual room.”
With some parties conducting real estate closings on mobile phone apps, there’s a potential for security breaches, and the way a client applies an electronic signature “could be circumspect,” Giavedoni says.
“Signing with a stock signature that is not encrypted or coded can make it difficult to prove someone signed a document in the absence of a real witness. Unless the system is closed and allows for a secure return of the signed documents, there is always the risk that the document can be intercepted and modified and the target of a fraud,” he says.
“As there are people out there who dedicate their livelihood to creating new and enhanced frauds, it is just a matter of time before a sloppy virtual transaction gets into the wrong hands and compromises someone’s personal information, like a signature. At that point, there will be lots of finger-pointing.”