AGM passes resolutions to counter poor mortgage practices
Surrey lawyer Ronald Morin urges his colleagues to support a resolution he and Peter Shrimpton of Whistler brought to the September 23 AGM. The resolution calls on the Law Society to take steps to ensure that borrowers in mortgage transactions receive legal advice and that there is no unauthorized practice by title insurance companies. After a vigorous debate, lawyers at the meeting passed the resolutions (94:70). The Benchers have decided to set up a task force on title insurance and mortgage practices to explore the concerns expressed in the AGM resolutions, both to ascertain the facts and to study the policy issues.
A majority of lawyers attending the September 23 AGM passed (94:70) two resolutions put forward by lawyers Ronald Morin of Surrey and Peter Shrimpton of Whistler regarding mortgage-signing practices and title insurance companies.
The resolutions call on the Law Society to:
- create a “rule of practice” forbidding lawyers from witnessing the execution of mortgage documents unless the borrower has received comprehensive legal advice;
- lobby the provincial government, financial institutions and regulators of financial institutions on the detrimental effect of borrowers signing mortgages without legal advice;
- prevent lawyers from facilitating the unauthorized practice of law or practices detrimental to the best interests of the public when witnessing the execution of mortgage documents prepared by or to be registered by title insurance companies;
- take steps to end unauthorized practice or other practices detrimental to the public, including commencing actions pursuant to the Legal Profession Act and lobbying government for legislative change.
The preamble to the first resolution alleged that financial institutions were increasingly having borrowers sign mortgages without the benefit of legal advice. Mr. Morin and Mr. Shrimpton argued this was not in the public interest and could result in mortgages being unenforceable.
The recitals to the second resolution alleged that two title insurance companies — FCT Insurance Company Ltd. (dba First Canadian Title) and FNF Canada Company, a division of Fidelity National Financial Inc. — had developed a practice of drawing, executing and registering residential mortgages that did not involve lawyers or notaries. According to the resolution, this practice results in unsophisticated borrowers placing mortgages on their properties without fully understanding the legal implications. The recitals also alleged title insurance companies were not filing mortgage documents with the Land Title Office in a timely fashion, thereby undermining the integrity of the Torrens system. In addition, the recitals said the Law Society had determined that the drawing of mortgages by FCT and FNF constituted the unauthorized practice of law.
The resolution calls on the Law Society to take all reasonable measures to end these practices by title insurance companies by preventing lawyers from witnessing mortgage documents prepared by FCT and FNF, by taking action against the alleged unauthorized practice and by lobbying the government for legislative changes.
During debate, lawyers for FCT and FNF expressed the view that the alleged facts set out in the recitals to the motions were inaccurate and possibly defamatory.
D. Anthony Knox of McCarthy Tétrault LLP, counsel for FNF, said there was no increasing practice of having borrowers sign mortgage documents without legal advice. He said all FNF procedures were carried out by lawyers, that borrowers were always given the option of obtaining independent legal advice and that FNF’s practices complied with all Law Society rules. He added that the allegation of unauthorized practice against his client was true, but “seriously misleading” because FNF had ended the practices in question. Mr. Knox said that “when the Law Society informed FNF that purely clerical form-filling constituted unauthorized practice, FNF changed its procedures to conform with the Law Society’s requirements pending appeal to the courts.”
FCT’s counsel, James P. Taylor, QC, of Taylor Jordan Chafetz, said the allegation of unauthorized practice against his client related to a program FCT had since changed. Mr. Taylor said FCT’s refinancing program deals only with a borrower who is refinancing an existing mortgage and is sold only to commercial lenders. He noted that the borrower always has the choice of using title insurance or a lawyer. There were no cases of a title insurance mortgage being found to be unenforceable, and title insurance companies had a vested interest in ensuring mortgage documents were filed promptly, he said.
Several speakers said the resolutions could be seen as preventing borrowers from choosing whether or not they wanted legal advice and might have a negative impact on public perception of the profession.
The Law Society will soon have a new task force, chaired by President Ralston Alexander, QC, to study title insurance, and to look at issues of fact and policy behind recent resolutions passed at the AGM.
Those resolutions came to the Benchers’ table for consideration in October. They raise concerns about title insurance companies and about borrowers not receiving legal advice in mortgage transactions.
Mr. Alexander told the Benchers that launching a task force study was an appropriate follow-up to the AGM. “In order to responsibly deal with the members’ concerns that are expressed in the resolutions, we have first to get the facts,” he said.
The Task Force will be appointed shortly and is expected to bring forward recommendations by mid-2006.