From the Ethics Committee
Lawyers may participate in First Canadian Title's redesigned "Home Closing Program"
Last Fall the Ethics Committee concluded that it was not proper for a lawyer to act on a simple conveyance for the purchaser of real estate, the mortgagee and a title insurer (such as First Canadian Title): see the September-October 2001 Benchers' Bulletin.
Following a redesign of the First Canadian Title home closing program, the Committee has now changed its advice to the profession.
As the First Canadian Title program was originally designed, the Ethics Committee had stated the following, in part:
It was the view of the Committee that Appendix 3 of the Professional Conduct Handbook does not permit a lawyer to act for a title insurer in addition to either or both of the purchaser and mortgagee. Appendix 3 is an exception to the rules set out in Chapter 6 of the Professional Conduct Handbook that prevent lawyers from acting for clients who are adverse in interest and which would ordinarily prevent lawyers from acting for multiple parties to a real estate transaction.
The usual rule in Chapter 6 has been modified in the case of real estate matters to reduce the costs that separate representation of all parties would require, and because simple real estate transactions unfold in predictable ways that generally permit lawyers to avoid conflicts.
In the Committee's view the sale, purchase and mortgage of real property is a "real property transaction" contemplated by Appendix 3. However, a contract to insure the title cannot be said to be part of the real property transaction. It was the Committee's opinion that such a contract is a contract of insurance that falls outside the real estate exception to the conflict rules permitted by Appendix 3.
In the Committee's opinion, lawyers must be free to give advice to purchasers and lenders concerning the appropriateness of title insurance for any individual real property transaction. While it may be a good idea for purchasers and lenders to insure the title to property in some circumstances, there will be other situations where the cost of title insurance may not be justified. If lawyers were to act for a title insurer along with a purchaser or lender they would not be positioned to give advice concerning that issue to the purchaser and lender because of a conflict between the interests of those clients and the interests of the title insurer.
As a result of the Ethics Committee opinion, First Canadian Title redesigned its home closing program. These are some of the features of the redesigned program:
- First Canadian Title is not a client of the lawyer who acts for the purchaser or for the purchaser and lender,
- the lawyer acting for the purchaser, or for the purchaser and the lender, owes no duties to First Canadian Title, other than the ethical duties a lawyer owes to a non-client,
- the purchaser is free to choose any lawyer willing to act in the matter, and
- the lawyer who acts for the purchaser or for the purchaser and lender is free to raise and discuss with those clients any aspect of title insurance, whether or not the clients have a binding obligation to purchase title insurance in connection with the transaction.
It is the Ethics Committee's view that, under the redesigned First Canadian Title home closing program, it is proper for a lawyer to act for a purchaser, or for a purchaser and a lender (provided that representation is permitted by Appendix 3).