Question: How many lawyers does it take to register a deed transferring the
ownership of a parcel of land?
Answer: For the past 212 years, the answer has been "one." Next year, the
answer will be "two."
Ever since the province of Upper Canada introduced land registration in 1795,
one Ontario lawyer could represent both a buyer and seller and register a
transfer or deed from one to the other.
Of course, Law Society rules prevent a lawyer from acting for both sides
where there is a conflicting interest between the clients, but as far as the
government was concerned, anyone – lawyer or not – could represent both sides of
a transaction and register a change of ownership.
Now, all that is about to change and the public will be forced to bear the
brunt of the cost. In the wake of the passage of Bill 152, its fraud-buster
legislation, the Ontario government is about to introduce a sea change in public
accessibility to the land registration system.
Starting early in the New Year, only lawyers will be able to register a
document to transfer land ownership. From a public perspective, however, the
more significant rule change will require that virtually every ownership change
must have one lawyer acting for the seller and a separate, independent lawyer
acting for the buyer.
The policy reason for implementing the two-lawyer rule is the belief that
having two lawyers involved in every title transfer will significantly reduce
the occurrence of title fraud and the number of claims to the government's Land
Titles Assurance Fund.
At the same time, the government has downloaded a significant component of
the insurance risk from the Assurance Fund to LawPRO, the Law Society's own
insurance company. Starting in the spring of 2008, title fraud claims where a
lawyer has been involved – either as a participant or a dupe – will be referred
to LawPRO instead of the government's fund.
As a result, every Ontario real estate lawyer will now have to contribute an
additional $500 a year to underwrite the new insurance risk.
Normally, most real estate transactions involve two lawyers. Many however,
typically use only one lawyer. Some of these include transfers:
- from one spouse to another (either in a separation context or for any
other reason)
- between parent and child
- to or from an owner to his or her own corporation for tax or other
purposes
- in estates between an estate trustee and the beneficiaries
- in remote locations where the closest real estate lawyer is hundreds of
kilometres away from the first one
- where the money changing hands is nominal, such as for a condominium
locker
- between neighbours to correct a boundary problem
- for estate-planning purposes
- where both parties have been long-time clients of the same lawyer
Under the government's proposed rules, transfers or deeds in virtually all of
these types of transactions will soon require two lawyers – effectively doubling
legal costs for the parties involved.
Is the rule change justified? I don't think so.
There are about 2.2 million land registrations every year in Ontario. Over
the past 10 years, there has been an average of about 10 fraud-related claims a
year to the Land Titles Assurance Fund. Not all of them are successful, and no
decisions (if there were any) have been published on the fund's website since
2004.
The government has not provided any statistical or anecdotal evidence to
support its position that a two-lawyer rule will eliminate or reduce real estate
fraud. In the meantime, a significant segment of the public involved in real
estate transactions will be inconvenienced and saddled with significant
additional legal costs.
To me it's like killing a fly with a sledgehammer.
