Practice Watch, by Felicia S. Folk, Practice Advisor

Deficiency holdback languishing in your trust account?

How do you avoid having a deficiency holdback sitting in your trust account for months or even years after a closing?

If you give an undertaking carelessly, you may find yourself dealing with an unhappy purchaser client who demands money you are holding in trust because a vendor still has not remedied deficiencies to the satisfaction of your client, or at all. How do you close that conveyancing file without breaching your undertaking "to hold money in trust until deficiencies are remedied" when there is no time limit on your obligation?

When used properly, undertakings can expedite otherwise cumbersome transactions. When used improperly, undertakings can be the source of expensive and burdensome problems.

If you undertake to hold funds until the happening of a certain event, include an alternative if the event does not take place, that is, if the undertaking or conditions to the undertaking cannot be met. If you undertake to hold funds until deficiencies are remedied, include a mechanism to deal with the deficiency holdback in the event the vendor does not do the work or there is a dispute about the quality of the work.

You might want to set out the circumstances under which you may pay the disputed amount into court after a certain date as an acceptable fulfilment of your undertaking, or provide some other means of relieving your firm of obligations with respect to a deficiency holdback.

You should discuss with your client the possible outcomes and reach a clear understanding about what your role might be in the event of a dispute over the holdback and when your role as solicitor in the conveyancing transaction will be at an end.

Tort claim may trigger the application of the Workers' Compensation Act

When an individual is involved in an accident that gives rise to a tort claim, the Workers' Compensation Board may, on request, make a determination that he or she was a worker pursuant to section 11 of the Workers Compensation Act.

If such a determination is made, the worker may not be entitled to pursue the tort claim, although, if the accident involved a motor vehicle, the worker's Part 7 claim remains alive. Depending on the circumstances, the claim may need to be pursued. If, in acting for the injured worker, the worker's lawyer does not initiate a WCB claim within time limits prescribed by s. 55 of the Act (one year from the date of the accident), the Workers' Compensation Board may decide that he or she is ineligible for WCB benefits.

In addition to the problems that may then be encountered in attempting to obtain benefits from the WCB, the section 11 determination may enable an automobile insurer to recover costs and benefits paid out for the period before the WCB claimed jurisdiction.

It is prudent practice to commence, not only the WCB claim within the time limits prescribed by s. 55 of the Act, but also the tort claim and any applicable Part 7 benefit claim, within their respective limitation periods.

The Workers' Compensation Board will accept a provisional claim that satisfies the requirement to file within one year of the date of accident. All remedies are then left open, and the section 11 determination will ultimately determine whether the tort action can be pursued.

Closed Files

Please note that one of our most requested papers, Closed Files - Retention and Disposition, has been revised and is now on the Law Society website. Watch the "Services for Lawyers/Practice and Ethics" section of the site at as new and updated practice resource materials are frequently added.