Law Society Conveyancing Practices Task Force issues second interim report

December 19, 2002

The Conveyancing Practices Task Force of the Law Society has issued its second interim report, which recommends several conveyancing practice reforms and new financial protections for the public in trust transactions.

For a copy of the report, please visit the Law Society website at http://www.lawsociety.bc.ca/library/frame_reports.html. The Task Force, chaired by Victoria Bencher Ralston S. Alexander, QC, welcomes comments from the profession, which can be sent c/o Ron Usher at rusher@lsbc.org or by fax to (604) 669-5232.

The Benchers appointed the Task Force on June 29, 2002. The Task Force was asked to look at conveyancing practice issues, following the disclosure of irregularities in the real estate practice of former Vancouver lawyer Martin Wirick in relation to one of his vendor clients.

As a result of its work to date, the Task Force has concluded that, to better protect the public and uphold the integrity of lawyers' undertakings, there is a need to change certain conveyancing practices so as to diminish the opportunity for misuse of trust funds. There is also a need to improve the financial protections that cover all trust transactions.

The Task Force recommends that a vendor's solicitor in a real estate transaction be required by the Law Society Rules to provide a purchaser's solicitor - within 48 hours of completion of a transaction - evidence that encumbrances on title have been repaid. That evidence would be in the form of photocopies of correspondence and copies of cheques representing the repayment proceeds. Ideally, it would also include an acknowledgement by the financial institution of the receipt of repayment, along with the name of a contact person within the institution who can verify the repayment.

A second recommendation, which the Benchers have approved in principle, is that a financial institution would have 30 days after a mortgage repayment in which to issue a discharge, and the lawyer responsible for the discharge (typically, the vendor's lawyer) would have a further 30 days to register the discharge. If a discharge is not registered at the Land Title Office within the cumulative 60-day period, the lawyer would be required to advise the Law Society of the institution's failure to provide the discharge. A purchaser's lawyer would also be required to advise the Law Society if the vendor's lawyer does not provide discharge particulars within that same period.

These notifications are intended to provide the Law Society information on 1) the business processes of financial institutions and the practices of the profession, and whether certain institutions are unable to discharge mortgages within a particular timeframe and 2) whether there are situations that require attention or intervention from the Law Society. The Task Force stresses that no adverse inferences would be drawn against a lawyer from a simple failure to obtain a discharge of a repaid mortgage from a financial institution, in the absence of evidence of breach of undertaking or defalcation.

In its first interim report, the Task Force had recommended a two-cheque practice in conveyances, but that proposed reform drew little support from within the profession and will not be pursued.

The Task Force is also recommending new innocent party insurance coverage to compensate the public for losses that result from lawyer defalcation. The Task Force now recommends that such coverage apply on a go-forward basis and that premiums not be used to fund past losses, such as any claims approved with respect to Mr. Wirick's practice. Under the new program, coverage of $1 million per trust transaction is projected (an annual aggregate of $10-15 million per lawyer), and the coverage is now expected to apply to all trust transactions, not only to real estate transactions.

Funding of the program would be through a blended premium. The first component of the premium would be a general assessment paid by all practising lawyers. The second component would be a fee levied on a law firm for each trust account (or trust ledger within a pooled trust account) opened for a client respecting a specific legal transaction or legal matter.

One fee would apply to the overall legal transaction, regardless of the number of trust deposits made or trust cheques written in the course of the transaction. It is intended that there would be an exemption for very small trust transactions and for the collection and payment of retainers. Because of the blended premium and because the transaction fee would apply

to a broader range of legal matters than real estate transactions, the Task Force anticipates that the amount of the transaction fee would be much less than previously contemplated ($10 / legal transaction or other legal matter is possible). Recommendations on the premium will be made to the Benchers in early 2003 after appropriate statistical and program analysis.

The Task Force welcomes the views of BC lawyers on its second interim report and recommendations.