Real Estate Lawyers Do Not ‘Waste’ Client’s Money

Bob Aaron in Legal, Home Buying

House-Lawyer
Last week I received
an email from a Star reader who had just bought a $588,000 home in
Scarborough and wanted to know if I could refer him to a real estate
lawyer “with the lowest fee in the business.”

“I’m seeking the least
expensive legal representation I can find,” Richard wrote. “Now
burdened with a large mortgage, I do not have the spare finances to
spend on bloated real estate lawyer fees.”

Richard told me that
he contacted a number of real estate lawyers to obtain competitive
quotes, and then sent me the details of the lowest quote he received.
The quote included the lawyer’s base legal fees, plus out-of-pocket
expenses, title insurance and HST.

But Richard was still not happy and wanted something cheaper.

“I feel the
disbursement and title insurance amounts should not exist as charges at
all, nor should they be chargeable amounts to a potential client like
myself,” he wrote. “I told the lawyer in our first meeting that I chose
to decline the title insurance.

“I’ve read your
article on title insurance,” Richard wrote to me, “and the brochures
provided on the topic by the real estate lawyer, and I still reach the
conclusion that the coverage is not necessary nor worth it.”

It appears from
Richard’s viewpoint that the lawyer should either absorb all the
client’s out-of-pocket charges, including title insurance, which would
leave the lawyer little or nothing at the end of the day, or else the
lawyer should just not “waste” money on “needless” items like
registering the deed, searching the title, or checking that the seller
has paid any outstanding taxes and mortgages.

I pointed out to
Richard that title insurance actually saves some search expenses that
the lawyer might otherwise have to incur, so that the net cost is
actually much lower than the policy premium. The lawyer he spoke to was
going to use an insurer that did not provide what is known as legal
services coverage. This coverage protects the purchaser even if a
mistake occurs on closing that is not covered by an itemized risk in the
policy.

This includes many of
the risks normally beyond the scope of a lawyer’s due diligence,
including fraud, forgery, survey errors, and errors made by
municipalities and utility companies in providing information to the
lawyer.

Richard changed his
mind about title insurance after I explained it to him, but he was still
after the cheapest lawyer in the business. “My file is
straightforward,” he wrote to me. “I only want to pay (the quoted legal
fee) to have the entire legal paper work completed. . . . I feel the
quote I received is still far too high and not justifiable.”

The way I see it,
legal fees are the best consumer bargain in the entire transaction.
Typically, they are far less than the land transfer tax, the annual
property tax, or the property’s fire insurance, and are a tiny fraction
of the real estate commission paid by the buyer. Yes, the buyer. Make no
mistake: the seller writes the commission cheque, but it’s the buyer’s
money.

Of course, legal fees
charged by real estate lawyers do vary, but over a relatively small
range. I believe costs should not be the only factor in choosing a real
estate lawyer.

An informed consumer will often ask questions about:

  • The lawyer’s experience.
  • Whether the lawyer offers “the personal touch.”
  • Staff experience.
  • The percentage of the law practice devoted to real estate.
  • Whether the lawyer could be elsewhere on the day of closing.
  • Whether the buyer will actually get to meet the lawyer in person on and before closing
  • Whether the purchase transaction is processed in their office or will the work be outsourced to a third party.
  • The lawyer’s ability to “quarterback” the transaction and to stick-handle the players if the transaction starts to go sideways.
  • Whatever the fees are,
    it’s always a good idea to make sure that the lawyer will be accessible
    throughout the process and especially on closing.

    And no, I don’t give Richard any lawyer names.

    Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron
    in Toronto and a past board member of the Tarion Warranty Corp. Bob
    specializes in the areas of real estate, corporate and
    commercial law, estates and wills and landlord/tenant law. His 
    Title Page column appears alternate Fridays in The Toronto Star and alternate weeks on Move Smartly.  E-mail bob@aaron.ca

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