Property Buyers Should be Aware of Real Estate Lawyers' Legal Standards

Bob Aaron in Legal, Home Buying, Condo Buying

Lawyer and Client

A fact sheet published last month by LawPRO — the Lawyers’ Professional Indemnity Company — provides an interesting insight into the practice standards expected of Ontario real estate lawyers.

LawPRO is the Law Society-owned insurance company, which provides a mandatory $1 million in liability insurance for every Ontario lawyer.

LawPRO’s fact sheet reveals that as the value of Ontario real estate has steadily risen, so has the value of real estate claims made against the insurer. Real estate claims are now the second-most costly area of law for the insurer, after civil litigation.

From 2006 to 2016, just 16 per cent of negligence claims made against Ontario real estate lawyers were successful. Another 35 per cent were resolved without any cost to the insurer, and 49 per cent were closed with payment of defence costs only.

The insurer’s experience is not only a lesson to lawyers about properly handling a real estate transaction, it is also instructive to buyers and sellers on what to expect from their real estate lawyers.

Among the most common malpractice errors made by real estate lawyers were misreading — or not reading — a survey, title search or registered reference plan of survey.

Another common error is failing to review a condominium status certificate and not bringing deficiencies to the client’s attention.

On a condominium purchase, lawyers have been sued for failing to ensure that the parking space and locker specified in the agreement of purchase and sale are actually for sale — and that the legal description of both units is correct.

Claims have also been made against lawyers for failing to ensure that the unit shown on the condominium plan meets the client’s expectations, for instance whether the unit overlooks the lake or a parking lot.

The lesson for purchasers here is always to insist that their real estate lawyers show them the location of their unit, plus parking and locker spots on the condominium plans. Experience has shown that closing a purchase without reviewing the condominium plans can be extremely risky.

Purchasers should always insist on meeting their lawyer during the transaction. Although clerical staff often prepare the transaction paperwork, LawPRO suggests that lawyers meet with the purchaser client in person at least once to review the transaction and understand the client’s instructions — particularly with respect to the intended use of the property.

Busy, high-volume real estate practices regularly lead to situations where the lawyer does not take the time to communicate with clients properly. Lawyers often completely rely on clerks, resulting in the lawyer being removed from the process.

Breakdown in lawyer/client communication is the most common cause of real estate claims against lawyers. LawPRO advises lawyers: “Spending more time meeting with clients and documenting discussions can be of great help in both preventing and defending a claim.”

Not every matter is straightforward, LawPRO cautions, and neither the lawyer nor the client should have to address a problem that was only noticed on the day of closing — or never noticed at all.

Meeting with a lawyer in advance allows a buyer to explain his or her intentions for future use of the property. If a purchaser intends to build a swimming pool, sewers or utility easements may make it impossible. Zoning may not permit a home-based business, or conversion to more than one dwelling unit.

Different types of title and non-title searches are required depending on the type of property being purchased, for example single unit vs. multiple unit, and commercial vs. residential.

Bob Aaron is Toronto real estate lawyer. His Title Page column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website Email Bob

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