Real Estate Practice Guide

INTRODUCTION

This handbook is a guide to help lawyers and their staff better understand some of the
regulatory requirements and guidelines relating to the practice of real estate. This
handbook is not intended to cover every possible ethical situation encountered in the
practice of real estate law. In order to ensure compliance, lawyers should refer to the
Law Society Rules of Professional Conduct (Rules) and By-Laws.

PART 1 - THE REAL ESTATE TRANSACTION

Over the course of the past decade there have been a number of changes both to the law
affecting real estate practice and to conveyancing practice. This part of the article
summarizes some of the regulatory requirements and issues regarding title insurance,
electronic registration, mortgage transactions and disbursement of closing funds.

TITLE INSURANCE

Both the Rules and the Residential Real Estate Transactions Practice Guidelines
contain provisions dealing with title insurance.

RULES – TITLE INSURANCE

The Rules impose certain obligations on the lawyer with respect to title insurance in
real estate conveyancing.


When advising a client about a real estate conveyance, a lawyer has an obligation to:

• assess all reasonable options to assure title; 
• and advise the client that title insurance is not mandatory and is not the only option to protect the client’s interests in a real estate transaction

The lawyer should be cognizant of when title insurance may be an appropriate
option. Although title insurance is intended to protect the client against title risk, it is
not a substitute for a lawyer’s services in a real estate transaction.

The lawyer should be knowledgeable about title insurance and discuss with the clien
the advantages, conditions, and limitations of the various options and coverages
generally available to the client through title insurance. 

The Rules also provide that a lawyer may not receive compensation, whether directly
or indirectly, from a title insurer, agent or intermediary for recommending a specific title
insurance product to his or her client.

Furthermore, the lawyer must disclose to the client that no commission or fee is being
furnished by any insurer, agent, or intermediary to the lawyer with respect to title
insurance coverage and if discussing TitlePlus insurance with the client, the lawyer
must fully disclose the relationship between the legal profession, the Law Society and
the Lawyers Professional Indemnity Company.

RESIDENTIAL REAL ESTATE TRANSACTIONS PRACTICE GUIDELINES – TITLE
INSURANCE

The Residential Real Estate Transactions Practice Guidelines with the exception of
those provisions contained in Rules or By-Laws, set out recommended practices and
procedures for lawyers acting on residential real estate transactions. These
Guidelines contain a number of references to title insurance and best practices.

ADVISING THE CLIENT AT THE OUTSET OF THE TRANSACTION

The Guidelines provide that the lawyer should consider forwarding an initial letter to
the client at the outset of the retainer that may include information about the various
methods of assuring title and confirmation of the method selected by the client.

Where title insurance is being used, the lawyer should at the commencement of
the retainer:

• advise the client about the searches that the lawyer will not be performing and the type of information that these searches would reveal about the property such as zoning, encroachments or survey issues;

• communicate with the client to determine whether the client has any adverse knowledge about the property that could give rise to the insurer relying on the “knowledge” exclusion if the matter is not disclosed and “insured over” pre-closing.

 Where title insurance is not being used, the lawyer should advise the client about the
post closing protections provided by title insurance which the client is not receiving
(e.g. regarding post-closing encroachments onto the property and fraud).

ADVISING THE CLIENT DURING THE COURSE OF THE TRANSACTION AND
REPORTING TO THE CLIENT

The lawyer should discuss with the client and obtain instructions from the client
regarding the off title searches that may be appropriate or advisable in view of the
nature of the property, the circumstances of the transaction, the terms of the agreement
of purchase and sale and the consequences of not conducting those searches.

Where title insurance is being used, the lawyer should be aware of what off title
searches are not covered by title insurance and either make the appropriate searches
or obtain waivers from the client.

The lawyer should also be aware of the inter-related nature of the following issues:
deciding not to make certain off title searches; allowing the requisition date to pass
without the results of those searches being available; the timing of receiving a title
insurance binder or commitment (usually after the requisition date has passed); and the
policy of the selected title insurer regarding “insure over” requests for adverse
circumstances which emerge before closing notwithstanding the lack of a search.

Prior to closing where title insurance is being used, the lawyer should review with
the client and receive written confirmation from the client regarding:

• the manner in which title is being assured;
• the state of title and the coverage that will be available under the client’s title insurance policy, if applicable;
• whether the client has any adverse knowledge about the property that could give rise to an insurer relying on the “knowledge” exclusion if the matter is not disclosed and “insured over” prior to closing.

 Where title insurance has been used to assure title, the reporting letter to the client
should not opine on title, but should include the title insurance policy issued to the client.

DELAY IN CLOSING

Where title insurance is being relied upon to close a transaction where registration is
delayed, there should be an express obligation on the part of the insurer as part of the
binder/commitment pre-closing addressed to the insured client to provide coverage to
the client for any adverse registrations which occur between releasing the closing
proceeds and registration of the title documents.

INSUANCE OF THE TITLE INSURANCE POLICY

The lawyer should review the draft title insurance policy or binder/commitment to
determine:

• that the insured is named correctly;
• that the legal description is correct and includes any off-site lands that should be included in the description such as easements located on other properties;
• whether there are other title issues, not apparent from the insurance commitment, of which the client should be warned
• what coverage is excluded under the policy.

 The lawyer should issue the title insurance policy as soon as possible after closing to
insure that an issued policy exists should the insured client need to make a claim and to
minimize the risk of the client being obliged to disclose adverse information obtained
between closing and the issuance of the policy.