An Open Letter to Clients

Posted by on Nov 12, 2018 in Articles | Comments Off on An Open Letter to Clients

Who am I?

I am a residential real estate lawyer in my 30 th year practicing in Markham.

What do I do?

I hire, fire, train, and supervise staff that perform title and off-title searches, serve clients and manage the vast amount of paper in a typical residential real estate file. I deal with mistakes and problems on files, which are inevitable. As soon as a new client or deal comes through our door, I meet the client or agent involved and try to sniff out any possible problems. I perform certain tasks which we are not allowed to delegate to non-lawyers including title opinions, completing “statements of law” on title documents, and trust account banking. I conduct “lawyer to lawyer” calls when needed. I attend (and sometimes give) lectures to keep current in real estate law many more hours than the mandatory twenty-for (24) hours per year required by our regulator, the Law Society of Ontario (LSO). This is over and above file-specific research such as review of agreements, internet searches, review of title and off title searches, searches against particular addresses, realtors, and parties to a transaction. I am motivated by the pleasure of meeting people at that most exciting and hopeful of times and a desire not to be the subject of legal claims or complaints over sloppy bookkeeping, delayed reporting etc.

Fees

Unlike family lawyers or realtors, for example, who can do half the job for half the fee (unbundled services), real estate lawyers can do little to limit their liability. They have a monopoly on the transfer of land and handle all deal monies thereby assuming personal responsibility for payment of banks, agents, and government taxes on deals. The suggested fee in 2007 to do the 135 steps in a condo purchase (see link below)

Master Chart PDF is at Fees PDF

On a simple $1M purchase with a bank mortgage the suggested fee (excluding HST and certain listed disbursements that typically are about $1000) is $3,600. This fee will never be seen by a residential real estate lawyer in my lifetime. As the number of lawyers in the GTA will soon exceed the number of homes for sale, market forces have seen fees (in real terms) steadily decline and (at least in Markham) are currently about $1000. Agents have likewise seen fees decrease but they are still typically 10 times what the lawyer (with comparable risk and insurance cost) will see.

It hasn’t all been good news for clients. Inadequately paid lawyers have foisted some of their insurance costs (title insurance) on clients – where it belongs. Typically, about $500/deal. Prior to title insurance lawyers only charged $50 (LawPro Levy) to clients.

Regulations

Fortunately, dear client, the LSO has of late focused the heavy hand of regulation on us unscrupulous residential real estate lawyers. First they regulated advertising to address lawyers that advertise very low fees only to increase disbursements and other charges. That makes sense. If asked, I tell “tire kickers” to get 3 quotes and accept the highest if they want the best chance of getting an honest and competent lawyer. LSO now intends to end “kickbacks” or “incentives” (required to be disclosed to clients) by title insurers to lawyers that in one case pay the lawyer $100 for their efforts in preparing and printing the policy. The suggestion is that lawyers who fail to disclose or pass on this “saving” or other incentives (volume rebates) are dishonest or unprofessional. That makes no sense. The takeaway is that every time LSO receives a complaint, or one of their 40 directors (37 of whom, by my count, have never seen the inside of a residential real estate practice or walked a mile in my shoes) perceive a problem, more regulations follow. It is a “hit or miss” process as this group of highly intelligent people with no experience in the business of a residential real estate practice try to head off public calls for the end of “self-regulation”. True to its consumer protection mandate, LSO has done nothing to dispel the public impression that real
estate lawyers are deceitful and dishonest, and deserving of more regulation. They see the problem as overcharging when the real problem is undercharging. They do nothing to promote the services of real estate lawyers but instead place the burden of educating the public on the real estate lawyers. For instance, all real estate lawyers are required to waste time explaining title insurance policies (complex documents that they know little or nothing about) to clients even though the decision to title insure is made by the client’s lender.

Why MUST you use a lawyer?

Regulation 69/07 of the Insurance Act of Ontario requires an independent lawyer to examine title prior to an insurance policy being provided to the Buyer client. Also, certain statements made on the electronic transfer of real estate must be currently completed only by a lawyer. This same monopoly does not extend to adding and removing mortgages. The public should rightly abhor monopolies and there are calls to permit non-lawyers to be permitted to transfer your home, just as a non-lawyer can put a mortgage on your home now. The public (and many realtors) perception is that real estate lawyers are at best unnecessary overhead and at worst deal killers. It is not by accident that the standard real estate forms used by realtors do not strongly advise you to see a lawyer before signing. This is in contrast to realtors. You’ve seen the commercials on TV about the unlucky buyer who doesn’t use a realtor. As for selling, when was the last time you saw a “for sale by owner” sign with a “sold” sticker?

Why SHOULD you use a real estate lawyer?

Until I am priced or regulated out of existence, I will continue to review draft or conditional sale agreements, kill or renegotiate ill-advised deals for the client, review status certificates, and examine complex titles and investigate addresses and agents. Many of these services involve extra time and insurance risk do not attract sufficient, or any, extra compensation. Title insurers will all say that they are no substitute for an independent lawyer. Until then, I (and many others in my field) will continue to value clients over deals, safeguard our clients’ interests in a way no real estate agent or title insurer can, and accept whatever fees the market will allow us to charge.

Sheldon Tenenbaum
August, 2018

Ramsi LGH
Ramsi LGH
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Arya Aboosaidi
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