REAL PROPERTY TRANSACTIONS
[Chapter 6, Rule 10]
1. This Appendix does not apply to a real property transaction between corporations, societies, partnerships, trusts, or any of them, that are effectively controlled by the same person or persons or between any of them and such person or persons.
Acting for parties with different interests
2. A lawyer must not act for more than one party with different interests in a real property transaction unless:
(a) because of the remoteness of the location of the lawyer's practice, it is impracticable for the parties to be separately represented,
(b) the transaction between the parties is a simple conveyance, or
(c) paragraph 10 of this Appendix applies.
2.1 When a lawyer acts jointly for more than one client in a real property transaction, the lawyer must comply with the obligations set out in Chapter 6, Rules 4, 5 and 6.
3. In determining whether or not a transaction is a simple conveyance, a lawyer should consider:
(a) the value of the property or the amount of money involved,
(b) the existence of non-financial charges, and
(c) the existence of liens, holdbacks for uncompleted construction and vendor's obligations to complete construction.
4. The following are examples of transactions that may be treated as simple conveyances when paragraph 5 does not apply to exclude them:
(a) the payment of all cash for clear title,
(b) the discharge of one or more encumbrances and payment of the balance, if any, in cash,
(c) the assumption of one or more existing mortgages or agreements for sale and the payment of the balance, if any, in cash,
(d) a mortgage that does not contain any commercial element, given by a mortgagor to an institutional lender to be registered against the mortgagor's residence, including a mortgage that is
(i) a revolving mortgage that can be advanced and re-advanced,
(ii) to be advanced in stages, or
(iii) given to secure a line of credit.
(e) transfer of a leasehold interest if there are no changes to the terms of the lease,
(f) the sale by a developer of a completed residential building lot at any time after the statutory time period for filing claims of builders' liens has expired, or
(g) any combination of the foregoing.
[amended 11/1999; 05/2001; 03/2006]
5. The following are examples of transactions that must not be treated as simple conveyances:
(a) a transaction in which there is any commercial element,1 such as
(i) a conveyance included in a sale and purchase of a business,
(ii) a transaction involving a building containing more than three residential units, or
(iii) a transaction for a commercial purpose involving either a revolving mortgage that can be advanced and re-advanced or a mortgage given to secure a line of credit,
(b) a lease or transfer of a lease, other than as set out in paragraph 4(e),
(c) a transaction in which there is a mortgage back from the purchaser to the vendor,
(d) an agreement for sale,
(e) a transaction in which the lawyer's client is a vendor who:
(i) advertises or holds out directly or by inference through representations of sales staff or otherwise as an inducement to purchasers that a registered transfer or other legal services are included in the purchase price of the property, or
(ii) [rescinded 10/2009]
(iii) is or was the developer of property being sold, unless paragraph 4(f) applies, or
(f) a conveyance of residential property with substantial improvements under construction at the time the agreement for purchase and sale was signed, unless the lawyer's clients are a purchaser and a mortgagee and construction is completed before funds are advanced under the mortgage.
[amended 11/1999; 05/2001; 03/2006; 10/2009]
Advice and consent
6. If a lawyer acts for more than one party in the circumstances as set out in paragraph 2 of this Appendix, then the lawyer must, as soon as is practicable,
(a) advise each party in writing that no information received in connection with the matter from one can be treated as confidential so far as any of the others are concerned and that, if a conflict of interest arises, the lawyer cannot continue to act for any of them in the transaction,
(b) obtain the consent in writing of all such parties, and
(c) raise and explain the legal effect of issues relevant to the transaction that may be of importance to each such party.
If a written communication is not practicable at the beginning of the transaction, the advice may be given and the consent obtained orally, but the lawyer must confirm that advice to the parties in writing as soon as possible, and the lawyer must obtain consent in writing prior to completion.
The consent in writing may be set out in the documentation of the transaction or may be a blanket consent covering an indefinite number of transactions.
7. In this paragraph, "mortgagor" includes "purchaser," and "mortgagee" includes "vendor" under an agreement for sale, and "foreclosure proceeding" includes a proceeding for cancellation of an agreement for sale.
If a lawyer acts for both a mortgagor and a mortgagee in the circumstances set out in paragraph 2 of this Appendix, the lawyer must not act in any foreclosure proceeding relating to that transaction for either the mortgagor or the mortgagee.
This prohibition does not apply if
(a) the lawyer acted for a mortgagee and attended on the mortgagor only for the purposes of executing the mortgage documentation,
(b) the mortgagor for whom the lawyer acted is not made a party to the foreclosure proceeding, or
(c) the mortgagor has no beneficial interest in the mortgaged property and no claim is being made against the mortgagor personally.
Unrepresented parties in a real property transaction
8. If one party to a real property transaction does not want or refuses to obtain independent legal representation, the lawyer acting for the other party may allow the unrepresented party to execute the necessary documents in the lawyer's presence as a witness if the lawyer advises that party in writing that:
(a) the party is entitled to obtain independent legal representation but has chosen not to do so,
(b) the lawyer does not act for or represent the party with respect to the transaction, and
(c) the lawyer has not advised that party with respect to the transaction but has only attended to the execution and attestation of documents.
9. If the lawyer witnesses the execution of the necessary documents as set out in paragraph 8, it is not necessary for the lawyer to obtain the consent of the party or parties for whom the lawyer acts.
10. If one party to the real property transaction is otherwise unrepresented but wants the lawyer representing another party to the transaction to act for him or her to remove existing encumbrances, the lawyer may act for that party for those purposes only and may allow that party to execute the necessary documents in the lawyer's presence as witness if the lawyer advises the party in writing that:
(a) the lawyer's engagement is of a limited nature, and
(b) if a conflict arises between the parties, the lawyer will be unable to continue to act for that party.
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1. A transaction is not considered to have a commercial element merely because one of the parties is a corporation.
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Conflict with Chapter 6 representing two or more clients
Where a possible conflict exists between Appendix 3, item 6(a) and Chapter 6, Rule 5 of the Professional Conduct Handbook, item 6(a) overrides the more general statement contained in Chapter 6, Rule 5.
EC February 2000, item 9
Rules 3, 4 and 5 - Simple conveyance
Strata titled hotel units being sold by a developer have a commercial element that does not permit them to be classified as simple conveyances.
EC April 2000, item 12
A lawyer cannot act for a title insurer in addition to either or both of the purchaser and mortgagee. A contract to insure the title cannot be said to be part of the real property transaction. Such a contract is a contract of insurance that falls outside the real estate exception to the conflict rules permitted by Appendix 3.
EC October 2001, item 2
When a lawyer is attending only to execution and attestation of a mortgage, the client must be advised of such and of the need to obtain independent legal advice. Failure to do so constitutes professional misconduct.
A lawyer acted for the purchaser and mortgagee in a real estate transaction. The purchaser flipped the property and entered into an agreement with another purchaser, whom the lawyer also represented. The lawyer breached his fiduciary duty to the second purchaser by failing to disclose each party's interest in the transaction to every other party and obtaining their consent, and in failing to disclose the profit being made in the second conveyance.
2004 LSBC 40