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2002: No. 2 March-April
Table of contents
Lawyers ... staying at
the forefront of property transactions
Mike Seaborn and Jeff Jones have practised law on northern Vancouver
Island for nearly 20 years, and now oversee offices in Port McNeill, Port
Hardy and Alert Bay. Almost two years ago, the lawyers enhanced their
general practice through expanded legal services in the real estate field.
Jones Seaborn is now a "one-stop" service centre for clients
wishing to take advantage of solicitor residential property sales - from
assisting in marketing and showing a vendor's property, to negotiating
purchase contracts, to completing the conveyance. It's brought them
closer to their clients and the community. Elsewhere, another initiative is underway. Dale Janowsky, QC is one of
several lawyers who have envisioned a formal network of lawyers across the
province to promote their clients' business interests, including the
sale and leasing of commercial properties and assets, through a shared
database of client interests. It is a vision that has led to creation of
the Lawyers Business and Property Network launched this April, joining
together 36 lawyers to date, from Kamloops, the Okanagan, the Kootenays,
Vancouver Island and the Fraser Valley. The Benchers have encouraged the involvement of lawyers in the expanded
provision of legal services and are committed to keeping the profession
updated on current initiatives. The initiatives profiled here show
different approaches, yet they share a common thread - they put lawyers
at the forefront of property transactions to ensure clients benefit from
professional legal guidance, from start to finish. There are certainly issues for lawyers to watch on the horizon.
Following the launch of an expanded legal practice by Jones Seaborn, the
Superintendent of Real Estate raised some objections and appears to be
construing very narrowly the section of the Real Estate Act that exempts
lawyers from registration as real estate agents. The Law Society, however,
views a lawyer's representation of clients in these initiatives as
constituting the practice of law and in the public interest. For more on
the respective positions of the Law Society and the Superintendent, see
the sidebar "Are property sales the practice of law?" In its strategic plan (online at www.lawsociety.bc.ca), the Law
Society has recognized that client expectations are driving change in the
marketplace, and that lawyers need the flexibility to respond. The Law
Society is committed to reviewing its regulatory framework to ensure the
rules protect the core values of the profession without unnecessarily
hindering innovations by lawyers. The primary value that lawyers bring is
professional legal advice, offering greater protection and a more complete
service for clients.
Solicitor
property sales . the Jones Seaborn story
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B.C. lawyers are finding creative ways to renew their role in real
estate and business - guiding more clients through transactions, from
beginning to end. Michael Seaborn and Jeff Jones, whose general practice
on Northern Vancouver Island now features assistance to vendors with
residential property sales, have found their full service firm has struck
a chord with clients, and given them a new opportunity.
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For people selling a home on northern Vancouver Island, there is an
alternative to using a real estate agent or going it alone in a private
sale. For almost two years, Jones Seaborn, a two-lawyer practice based in
Port McNeill, has offered vendor clients more extensive legal services in
the real estate field, from initial listing, to sale to conveyance. It's
a service that fits well with their general practice, especially in this
small community where there is no resident real estate agent.
Jones Seaborn takes transactions from start to finish for vendors:
conducting recent title searches; examining title and advising on
encumbrances, mortgages, easements and rights of way; obtaining values
from the B.C. Assessment Authority; obtaining appraisals and advising on
market value; preparing sale particulars and advertising in local
newspapers and on the firm's website; erecting property signage;
presenting information packages on the property to potential purchasers;
showing the property; reviewing and advising on any purchase offers;
negotiating agreements and preparing legal documentation and discharges.
The cornerstone of this service, as with all of the firm's work, is
professional legal advice.
Mike Seaborn notes that lawyers have always been involved in real
estate sales, but usually near the completion of a transaction, when it is
more difficult to solve problems that may arise. "We are now involved
at an earlier stage in that process than we were previously," he told
lawyers at a Law Society workshop last year. "The bumper sticker
version is that we do more for less, and offer one-stop shopping."
Jeff Jones sees the services lawyers offer in real property sales
transactions as very different from those of realtors who list properties
for vendors but then work for purchasers for a split of a commission.
"Lawyers act for clients, provide professional services to the client
and always have their clients' best interests at heart," he says,
noting that his firm makes it very clear to a vendor client and to
potential purchasers looking at a property that the firm acts only for the
vendor. "We've found that clients are very appreciative of
that."
In Jones' experience, clients like having a choice and also look
favourably at the contingency fees charged by the firm.
The firm provides its vendor clients with exclusive representation,
legal advice and marketing services on a contingency fee basis: typically,
for a residential property, 4% of the selling price up to $100,000 and 1%
on any amount over $100,000. Jones Seaborn uses a contingency fee
agreement that has been reviewed and approved by the Law Society Ethics
Committee.
To reach potential purchasers for their clients' properties, the firm
relies primarily on its website, property signs, advertising and
information packages.
Mr. Seaborn notes that he and his law partner have found a way to offer
legal services in the real property field in a way that works for their
firm. They are also always willing to talk to lawyers who might wish to
offer expanded services in their own conveyancing practices.
For lawyers who might be intimidated by the prospect, Jones says that,
compared to a chambers application or a buy-sell agreement, "it's
extremely simple." Lawyers can start with one file and don't need
any additional systems. Jones Seaborn now helps 10 to 15 vendor clients in
offering properties at any given time.
If lawyers hesitate to take up this opportunity, Jones says it may be
founded on a misperception that this is similar to the realtor model, when
in fact it is very different. "If anything is consistent with our
historical legal services, this is," he says. "It's involving
title, real estate, title searches, negotiating and assessing value, all
of which we do on a regular basis. If there is anything that lawyers can
do, this is absolutely on all fours."
Lawyers interested in more information on the Jones Seaborn experience
may wish to visit the firm's website at www.island.net/~js-co
or contact Mike Seaborn or Jeff Jones.
| Are property sales the practice of law?
The Real Estate Act requires the licensing of people falling
within the definition of "agent," subject to a limited number of
exemptions, including one for lawyers. Section 2(a)(f) of the Act
provides:
This Part does not apply: . to a barrister or solicitor whose name is
inscribed on the rolls of barristers or solicitors in British Columbia, or
to a person employed by him or her, in respect of transactions in the
course of his or her practice.
Following on a complaint from the B.C. Real Estate Association a year
ago, the office of the Superintendent of Real Estate questioned whether
lawyers can rely on this exemption for solicitor property sales without
being licensed under the Real Estate Act.
The Law Society has taken the view that the Real Estate Act and Legal
Profession Act do not, with respect to the sale of real estate, define
exclusive fields of practice. Rather, they define exclusive fields of
regulatory authority. Under the Real Estate Act, the Superintendent
of Real Estate has exclusive authority to regulate non-lawyers in real
estate sales. The Law Society has exclusive authority under the Legal
Profession Act to regulate lawyers in the practice of law.
The Law Society imposes higher standards of education, conduct and
accountability on lawyers than are imposed on real estate agents and
salespersons and maintains insurance and special fund programs that are
better than the security provided to clients of real estate agents.
Accordingly, the Law Society has pointed out that requiring lawyers to be
licensed under the Real Estate Act would be redundant and would not
increase public protection.
An opinion from counsel concluded that, while the exemption would not
apply if the lawyer performed no legal services for a client, legal
services in connection with a real estate transaction includes negotiating
the purchase or sale, including evaluating factors going to the
negotiation such as appraisals, development or redevelopment possibilities
and financing. In the view of counsel, the wording of the Real Estate
Act exemption does not support a limitation - either on the means by
which a lawyer obtains a client or the context of the transaction in the
lawyer's overall practice of law.
Counsel distinguished a 1995 decision of the New Zealand Court of
Appeal. That Court held that New Zealand lawyers could not rely on a
similar exemption to operate freestanding property centres in coordination
with their practice as lawyers: Real Estate Institute of New Zealand v.
Lewis and Callanan CA 242/94 31.8.95. The dividing line acceptable to
the Court in that case was between a transaction that was incidental to an
existing lawyer-client relationship and one that involved active marketing
of property where it could be said that the primary service was selling
property rather than negotiating and conveying property. In that case, for
example, the clients were not required to use the lawyers for the actual
conveyancing. That is not the model of service that has been offered by
B.C. lawyers.
Despite that fact, the Superintendent of Real Estate is pursuing the
issue further and has advised the Law Society that, rather than seek a
court determination of the scope of the exemption for lawyers, he would
seek a legislative amendment to remove the exemption. Law Society
representatives met with the Minister of Finance in March to oppose any
amendment that would preclude lawyers from engaging in this field of
practice, noting that there has been no harm to the public in all the
years the exemption has been in place, nor have there been public
complaints or demand for legislative change.
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The Lawyers Business and Property Network . making connections
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Dale Janowsky, QC is one of 36 lawyers who have come together from
different corners of B.C. as part of a non-profit association, the Lawyers
Business and Property Network. The Network is developing a database of
business and property interests for lawyers to better facilitate the
buy-sell transactions of their clients. |
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A new initiative underway in April is the Lawyers Business and Property
Network. The Network is a non-profit association, open to all B.C.
lawyers, that helps lawyers assist clients - both buyers and sellers -
with business, property and financial interests, including the purchase,
sale and financing of commercial properties and businesses.
Now with 36 founding members, the Network is a forum for lawyers to
pool their collective client and business contacts, to further client
interests. As President and a primary organizer of the Network, Dale
Janowsky, QC of Kamloops, says that cooperative efforts in the profession
are important.
Mr. Janowsky sees great potential for lawyers, through the Network, to
tap into a pool of contacts. "You can pick up the lawyers directory,
multiply the number of lawyers by the number of clients they may
have," he said. "When we share information among the members in
an organized and professional manner, it's just head and shoulders above
whatever is being offered out there."
The Network is intended to help lawyers represent clients throughout
business and property transactions, and to receive fees commensurate with
the value of their services. As noted by Mr. Janowsky, clients regularly
pay real estate agents commissions of between 4% and 7%, while lawyers
currently receive conveyancing fees worth the one-tenth the value of those
commissions.
He sees great potential in a network providing opportunities to lawyers
and giving clients greater choice. "The program will support the
public interest by providing a one-stop service for clients of lawyers who
want market exposure for their business or property in addition to legal
advice on the purchase or sale," he says.
A client has several advantages in choosing a lawyer, including the
promise of strict confidentiality, which can be critical in commercial
transactions. "Some clients don't want it known that their business
is for sale because someone may try to take it away from them," notes
Mr. Janowsky. "If you have, for example, a client list that is an
integral part of the business, you can provide it to the other lawyer on
the basis that he does not disclose it to anyone, and the financial
records that go along with that. Our rules of conduct and ethics (as
lawyers) are so much stronger and onerous than in the real estate world,
and that's why we provide a better service."
The Lawyers Business and Property Network will feature several key
services:
- A public website (www.thenetwork.ca): This
website will provide general information for lawyers and clients.
- A "B.C. lawyers-only" intranet (www.lbpn.intranets.com): Members of the Network can post client properties, businesses or other
interests in a central database. They can use this database to negotiate
and conclude transactions on behalf of clients. All B.C. lawyers can
browse this database by first registering for access (see page 10).
- Information and template packages: Members of the
Network will receive - via email and a web forum - standard forms
for listings, templates for retainer agreements and guidelines on how to
handle an initial set of transactions.
- Package of support services: On behalf of clients,
members of the Network can purchase an optional service from an outside
supplier that manages and provides signs, valuations, property
descriptions, photos and other related materials.
The Lawyers Business and Property Network offers members fee agreement
templates (either a fixed fee or contingency basis) when representing
buyers or sellers. Fee negotiations and arrangements are left entirely to
the individual lawyer and client.
What professional conduct considerations have been canvassed in
relation to the template agreements? The Law Society Ethics Committee
reviewed certain aspects of the agreements for the Network last December,
specifically in relation to lawyers charging placement fees to buyers and
accepting finders' fees for financing. The Committee was satisfied that
the agreements would not violate Chapter 6, Rule 8 of the Professional
Conduct Handbook (Finders' fees), given that all finders' fees and
brokerage fees are disclosed to and approved by a client, and paid to the
client's credit. In the Committee's view, a buyer's agreement could
properly allow for the buyer to pay a fee to his or her lawyer based on a
percentage of the purchase price without violating Chapter 7, Rule 1 of
the Handbook (Acting when the lawyer has an interest in the matter)
as a lawyer is always under an obligation to minimize costs for a client.
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Mr. Janowsky invites all lawyers to visit the Lawyers Business and
Property Network information site (www.thenetwork.ca). To register
for access to the private intranet, first register at the Juricert website
(www.juricert.ca), click on "Products and Services" and
submit a request to apply to the Network. Once your Law Society membership
has been confirmed by Juricert, the Law Society's online authentication
service, you will be given a password to www.lbpn.intranets.com.
If a lawyer wishes to do more than browse the intranet - to post a
listing or conclude a transaction for a client - he or she can do so by
joining the Network, paying the annual fee and any applicable posting or
transaction fees. The annual membership fee is $250.
For more information, you can also contact Mr. Janowsky by email at dale.janowsky@thenetwork.ca, by telephone at (250) 372-2022 or by fax at
(250) 372-0087.
| Mandatory liability insurance coverage
The coverage provided by the Law Society's mandatory liability
insurance policy includes coverage for errors made by lawyers in acting
for buyers and sellers in the purchase and sale of property and goods. As
always, the extent of any coverage under the policy depends, in part, on
the exact nature of the activities undertaken.
The Lawyers Insurance Fund has already provided some assurances to the
members of the Lawyers Business and Property Network on coverage under the
policy for the services described in the Network's retainer agreements.
Other lawyers considering embarking on their own property initiatives are
encouraged to contact the Lawyers Insurance Fund directly for an
"advance ruling." The ruling will confirm whether the specific
activities in which the lawyer intends to engage fall within coverage, and
will provide information on limitations, if any, on coverage.
If it is ultimately determined that lawyers are precluded from engaging
in these activities without separate licensing, such as a licence under
the Real Estate Act (see Are property sales the practice of law?
on page 5), any services for which lawyers are required to be licensed
would no longer fall within coverage.
The Lawyers Insurance Fund reminds lawyers that this area of practice,
as with any others, poses potential liability risks for lawyers. The
highest risk faced by lawyers is the exposure to claims for negligent
misrepresentation. As soon as one side to the transaction, usually the
purchaser, alleges that misinformation was given to them about a matter of
particular importance, lawyers will quickly find themselves embroiled in
the dispute.
Like all risks, the risk of liability for misrepresentation can, with
careful practice and management, be minimized. For instance, when
appropriate, lawyers will want to clearly communicate to the parties that
the lawyers are not responsible for the accuracy of specific information.
Further, when a lawyer does provide information about the property, that
information should be confirmed in writing, along with any appropriate
disclaimers or warnings.
For more information on any of these matters, please contact Margrett
George at the Lawyers Insurance Fund by telephone at (604) 443-5761 or by
e-mail at mgeorge@lsbc.org.
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