From time to time, lawyers get accused by real estate agents of being "deal killers." I was reminded of this recently in an email from Paula Riopelle, a real estate lawyer in Orleans, Ont.
She was responding to my Nov. 1 column, "Agents should never brush off the need for a survey." In it, I argued that title insurance is not a substitute for an accurate survey prepared by a professional land surveyor.
Riopelle echoed my concern that some homebuyers are receiving poor advice.
"My clients have been telling me at alarming rates," she wrote, "that their realtor said they don't need a survey when title insurance will suit them just fine. This is troubling to me, as they are advising clients about issues for which they are not qualified to provide advice.
"I find it extremely frustrating that in their efforts to close the deal and collect their commission cheques, the interest of the client takes the back seat."
She added, "A few real estate agents have also told me they're tired of lawyers 'killing their deals' when a status certificate is reviewed, or other similar issues the lawyer will have warned the client about."
Unfortunately, some real estate agents position themselves as adversaries to their client's real estate lawyer in purchase or sale transactions.
The website of Scarborough law firm Fleury, Comery LLP contains a memo to the firm's clients noting, "Sometimes our clients find themselves being urged to sign an agreement before consulting their lawyer because 'lawyers kill deals.' "
The memo concludes by saying "Yes, lawyers are deal-killers. We kill bad deals."
Most real estate agents are conscientious and serious about their obligations. "The good agents," Riopelle says, "aren't worried about us properly advising clients about issues that we discover about a property or issues disclosed in a (condominium) status certificate – they, too, want their clients to be satisfied."
I know what she means. As many as half the status certificates that I review for Toronto condominium transactions reveal that the offer and listing contain the wrong unit or level number, or the wrong maintenance fees.
As well, a high percentage of the resale offers that I see for Toronto freehold homes contain clauses which are unnecessary or which duplicate the printed form but compromise the protection of one or both parties to the agreement.
Sometimes, however, the realtors in these transactions become upset when the issues are raised by the lawyer.
Better agents, and of course the clients, appreciate that kind of legal advice.
Several years ago, in his column in REM (Real Estate Magazine), the late Albert Teichner – a veteran B.C. realtor – urged lawyers and realtors to work together.
"In the home stretch," he wrote, "the realtor and lawyer should work together as equals in a team effort atmosphere. Only then will everybody win and benefit: the realtor, the lawyer and above all, the client."
In the course of a real estate transaction, if a real estate agent advises that title insurance is a replacement for a land survey, or that the lawyer doesn't need to advise on the content of the agreement, it might be worthwhile to ask who is protecting the client's interests.
Above all else, the lawyer's duty in a real estate transaction is to protect the client's interests – even if it means the client will abort the transaction or arrange to correct any matters which require amendment. And even if it means the lawyer won't get a fee on an aborted transaction.
Calling a lawyer a "deal killer" betrays a fundamental misunderstanding of his or her role in a real estate transaction.
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail bob@aaron.ca
Bob,
Thank you for another important post. A few industry/consumer thoughts.
From an industry perspective, many industries require professionals to maintain the highest ethical standards. However, differences in incentives give clues as to where cracks may appear - compensation is a key example. An agent and a lawyer never lose when they serve a client professionally; however, while the lawyer is compensated for the time taken to advise a client "no", the agent is compensated according to an "all or nothing" model. This, of course, is no excuse for the agent, but rather a reminder that an agent must be highly disciplined when it comes to putting clients first, a reality also experienced in financial and lending industries, among others, where sales models dominate.
From a consumer standpoint, increasingly sophisticated consumers feel most satisfied when they are treated by teams of professionals (in health care, in finance, etc.) who use varying viewpoints to find solutions together rather than duke it out at the client's expense. Given the complexity level of the real estate industry, the client is best served by the agent, the mortgage broker and the lawyer who expertly function in the ground between yes and no: "You shouldn't buy a home now, but here is a plan to get you there"; "We'll try to negotiate the elimination of this unacceptable clause"; "We cannot advise you to purchase this property, but I will show you others that meet your criteria."
To make this team approach work, it is key to understand the incentives driving all parties to a transaction - and where necessary, to reshape them in the client's favour.
Posted by: Urmi | November 24, 2008 at 12:46 PM