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Practice Management Issues in a Real Estate Practice

Many of the practice management considerations in a real estate practice are similar to those for other areas of practice. This resource, however, speaks specifically to lawyers practising real estate law and covers the following topics:

Letters of Engagement and Retainer Agreements

Communicating with Clients

Communicating with Other Parties

Unrepresented Parties

Documentation

Delegation of Work

Conflicts of Interest and Joint Retainers

Other information specific to a real estate practice can be found in the following practice resources:

Procedure for Real Estate Transactions

Mortgage Fraud – Red Flags

Contact List for Mortgage Discharges

Commissions and Discounts

Transaction Levy

Final Reports on Title

If you have any questions or would like to discuss any of this information further, you can contact the Director of Practice Management.

Letters of Engagement and Retainer Agreements

Good communication is one of the cornerstones of great lawyer-client relationships and it can also considerably reduce the chances of a negligence claim or complaint down the road. A letter of engagement or retainer agreement is a terrific method of communicating with your client.

As the letter of engagement or retainer letter is often the first correspondence your client receives from you, it is recommended that it cover, at a minimum, the following:

  • your name and the client’s name;
  • the nature and scope of the services you will provide, including any restrictions;
  • any instructions already received from the client;
  • the risk of the use of electronic communications and technology (e.g. email, cloud-based services) and seek consent of the client to use them; and
  • a reasonable estimate of the fees and disbursements and what those amounts are based on and how they might change.

It is also helpful to provide other information to your client at the start of a real estate transaction – for example, the name of the people that work with you and what role they will play in the transaction, the expected steps in the process, a timeline for the process and how the client can get in contact with you. It is also a good idea to set out anything that the client is required to do – clients who are aware of what to expect are likely going to be better prepared and more responsive.

Letters of engagement and retainer letters can also be used to educate the client, seek confirmation of instructions already received or to ask for instructions. For example, they can speak to the methods of assuring title, what the registration costs will be, explain and confirm any joint retainer issues, ask for instructions on who will be on title and how as well as outline the importance of obtaining a survey. Keep in mind that you do not need to reinvent your letter of engagement and retainer letter for every client – preparing a template of common paragraphs and information on these topics can help you fulfill your obligation to keep the client informed (see section 3.2-1 of the Code of Professional Conduct) while saving time. That being said, be sure to tailor any template to the specific matter at hand so that you don’t inadvertently provide erroneous information to your client.

Links:

Quality of Service: section 3.2-1 (Code of Professional Conduct)

Related Topics:

Communicating with Clients

Communicating with Other Parties

Unrepresented Parties

Documentation

Delegation of Work

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Communication

Communicating with Clients

Communication is essential to a smooth real estate transaction. It is important that you communicate effectively with both your client and with the other parties to the transaction, especially in matters that have short closing dates.

Part of good communication with your client starts with an engagement letter or retainer agreement. In addition, section 3.2-1 of the Code of Professional Conduct provides that a lawyer’s duty to provide courteous, thorough and prompt service to clients includes certain standards of practice, including:

  • keeping your clients reasonably informed;
  • answering reasonable requests from clients for information;
  • responding to clients’ telephone calls;
  • ensuring, where appropriate, that all instructions are in writing or confirmed in writing; and
  • answering, within a reasonable time, any communication that requires a response.

When dealing with clients, it’s always important to keep these standards in mind along with the duty of competence found in section 3.1-2 in the Code of Professional Conduct. The definition of a competent lawyer includes communicating at all relevant stages of a matter in a timely and effective manner (see section 3.1-1(d)).

The Code of Professional Conduct also requires that lawyers make a prompt and complete report when work is finished (see section 3.2-1 commentary [5](m)). Reporting letters to clients should be tailored to the transaction and it is recommended that they

  • review the results of the title search and include an explanation of the nature and effect of the registered documents;
  • confirm the discussions that the lawyer had with the client regarding title insurance and confirm the instructions received, and where the client opted to purchase title insurance, confirm the discussions about what the insurance covers and any exceptions to coverage;
  • confirm any limits on the retainer;
  • outline any unusual issues that arose in the transaction, the advice given, the instructions received and a description of how the issues were resolved;
  • include a description and summary of the instruments registered in order to complete the transaction;
  • describe the obligations assumed as part of the transaction or documents registered;
  • include a list of documents enclosed with the letter; and
  • enclose a detailed statement of account.

As part of the obligation to communicate with clients, lawyers should provide the originals of all documents that belong to the client and a copy of all other important documents relating to the file. If there is a question with respect to who owns any part of a file, the following resources may be helpful in determining the answer: Aggio v. Rosenberg (1981), 24 C.P.C. 7 (Ont. Sup. Ct.); J. Morris, F. Folk and J. Vamplew, “Whose File is it Anyway?” (1994) 52 The Advocate 87; and McInerney v. MacDonald, [1992] 2 S.C.R. 138.

Communicating well with your client is essential to running a successful law practice but this is one area in which many real estate lawyers are deficient. Many lawyers complain that it is too time consuming to keep the client up-to-date on the transaction; however, lawyers must keep in mind a short closing date or a busy practice does not absolve you of your obligations to the client. Regular communication with your client has benefits as well – it will likely highlight issues in the transaction earlier and go a long way in preventing complaints and negligence claims.

Links:

Quality of Service: section 3.2-1 (Code of Professional Conduct)

Competence: section 3.1-2 (Code of Professional Conduct)

Related Topics:

Letters of Engagement and Retainer Agreements

Communicating with Other Parties

Unrepresented Parties

Documentation

Delegation of Work

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Communication

Communicating with Other Parties

Communicating well with others is just as important as communicating effectively with your client. The Code of Professional Conduct sets standards for corresponding with others. As noted in Answering Letters and Enquiries, sections 7.2-1 and 7.2-4 of the Code of Professional Conduct provide that lawyers must be courteous and civil in the course of their practice and must not communicate in a manner that is abusive, offensive or otherwise inconsistent with the proper tone of a professional communication from a lawyer.

With respect to how quickly you are required to respond, section 7.2-5 of the Code of Professional Conduct notes:

“A lawyer must answer with reasonable promptness all professional letters and communications from other lawyers that require an answer, and a lawyer must be punctual in fulfilling all commitments.”

Reasonable promptness will depend on the circumstances, taking into account the nature of the inquiry and the time that may be required to complete steps required by the response. However, your best practice is to communicate with the other lawyer as soon as possible if your response will be delayed. This courtesy lets the other lawyer know that you have received the correspondence and that you are addressing it. It also allows the other lawyer to take steps to accommodate or adjust to the delay.

The second part of that standard, fulfilling all commitments in a punctual manner, includes completing final reports on title on time. As noted in Final Reports on Title, a delay of six months or more is not considered reasonable.

In purchase transactions, mortgage transactions and transactions involving title insurance, it is important for lawyers to remember their duty to keep the mortgage lender and the title insurance company apprised of relevant information in a timely way and to seek instructions from them when appropriate.

Links:

Answering Letters and Enquiries

Courtesy and Good Faith: section 7.2-1 (Code of Professional Conduct)

Communications: sections 7.2-4 and 7.2-5 (Code of Professional Conduct)

Final Reports on Title

Related Topics:

Letters of Engagement and Retainer Agreements

Communicating with Clients

Unrepresented Parties

Documentation

Delegation of Work

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Communication

Unrepresented Parties

When acting in a transaction where the other party is not represented by legal counsel, make sure you fulfill your obligations under section 7.2-9 of the Code of Professional Conduct to

  1. ) urge the unrepresented persons to obtain independent legal representation;
  2. ) take care to see that the unrepresented persons are not proceeding under the impression that you are protecting their interests; and
  3. ) make it clear to the unrepresented persons that you are acting exclusively in the interests of your client.

Links:

Communications: Letters of Engagement and Retainer Agreements

Communicating with Clients

Communicating with Other Parties

Documentation

Delegation of Work

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Communication

Ethics

Documentation

Keeping a record in your file of the decisions made and the discussions that took place in the matter should be a part of your everyday practice. This approach is recommended because it provides support if a complaint or negligence claim is brought against you, it saves you from making a decision again if you forget what you originally decided and it relieves your staff from trying to read your mind. It may also help you sleep at night if you sometimes wake up wondering if you have completed a step in a transaction. Documenting files well also helps if you are suddenly unable to continue working (e.g. in the case of sudden illness, impairment, disability or death) because it will be easier for another lawyer to pick up the file and continue serving your clients without missing any steps or duplicating them.

The goal with respect to documentation is have your file be a full and accurate record of all of the work you perform. As such, best practices dictate that you document, at a minimum, all of the following:

  • details of the discussions you have with your client and others;
  • the advice you give your client;
  • the instructions you receive from your client, especially if those instructions are contrary to your advice;
  • any waivers given by your client;
  • the undertakings you have given and accepted;
  • your review of the agreement of purchase and sale, survey, title documents, encumbrances, encroachments and restrictions on use with your client; and
  • if the client decides to buy title insurance, your discussions with the client about what the policy will cover and what it does not.

Documenting a file can mean an email to the client confirming instructions or it can be your own notes in the file. It can also be as easy as having a client initial the survey or report that you have reviewed with them or having a standard acknowledgement signed by the client saying that you reviewed certain information with them. Checklists can also be helpful – you can use them to ensure you don’t miss discussing anything about the transaction with your client or skip any steps in the transaction.

The method of documenting the transaction in your file is up to you and may differ depending on the context and the importance of what is being documented.

Don’t forget that this recommendation applies to your staff as well – their conversations with clients should also be noted. It is also important that you are capturing text messages if you text with your clients so make sure you keep a record of them in the file as well.

Related Topics:

Letters of Engagement and Retainer Agreements

Communicating with Clients

Communicating with Other Parties

Unrepresented Parties

Delegation of Work

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Communication

Delegation of Work

It is common for legal assistants and paralegals to play a vital role in a lawyer’s real estate practice. However, regardless of the role of legal assistants and paralegals, lawyers must keep in mind their responsibilities under the Code of Professional Conduct and the Law Society Rules with respect to delegation and supervision.

Lawyers are generally responsible for everything that happens in their files and must maintain a direct relationship with their clients (Law Society Rules, rule 12.03 and Code of Professional Conduct, section 6.1-1 and commentary). You are responsible for carriage of the client’s matter and you are required to have knowledge of the legal issues affecting the matter that require a lawyer’s expertise to address.

In particular, the lawyer must attend to everything that requires the lawyer’s professional skill and judgment (Law Society Rules, rule 12.02) and only a lawyer may give legal advice or sign a letter containing a legal opinion (see Code of Professional Conduct, section 6.1-3(b)). The following tasks must also be done by a lawyer:

  • give or receive undertakings (with certain exceptions) (Law Society Rules, rule 12.04; Code of Professional Conduct, section 6.1-3(c));
  • accept cases on behalf of a lawyer (with certain exceptions) (Code of Professional Conduct, section 6.1-3(a)); and
  • take instructions from clients unless the supervising lawyer directs the client to the assistant for the purpose and instructions are relayed to the lawyer as soon as possible (Code of Professional Conduct, section 6.1-3(j)).

Specific examples of what must be done by a lawyer in a real estate transaction are set out in rule 12.06:

  • attend on the client to advise and take instructions on all substantive matters;
  • review title search reports;
  • conduct all negotiations with third parties or their lawyers;
  • review documents before signing;
  • attend on the client to review documents; and
  • review and sign title opinions.

The requirement to attend on the client and to complete any task that involves the lawyer’s professional skill and judgment means that lawyers are responsible for the following:

  • reviewing agreements and title searches with the client;
  • discussing options for assuring title; and
  • reviewing closing documents with the client.

A person who is not a lawyer who undertakes any of these tasks may be providing legal services which is contrary to the Law Society Act, 1999.

There is further guidance on delegation of work in the Code of Professional Conduct and the Law Society Rules that applies generally to the practice of law. For example, lawyers must ensure that their staff identify themselves as an assistant to clients and potential clients (Law Society Rules, rule 12.05). Lawyers are also responsible for the content of any document containing the electronic signature of any non-lawyer staff in real estate transactions (Code of Professional Conduct, section 6.1-3 commentary [3]). It is recommended that lawyers review these provisions to ensure they are complying with them.

Compressed timelines and competitive pricing do not relieve a lawyer of the responsibility to properly assess the scope and nature of the work or to document it appropriately. In addition, lawyers should know that neither the pricing they agree to nor the software tools that may be available to them relieve them of their professional responsibilities to properly conduct due diligence as to the nature and unique aspects of the matter, to be diligent in investigating all aspects of the matter on behalf of the client, to document the matter with care and precision, and to provide the client with a thorough and accurate report on the work done.

With respect to what a legal assistant or paralegal is permitted to do, rule 12.06 states that a non-lawyer may attend to matters of routine administration and routine correspondence. In addition, legal assistants may draft documents and other correspondence including closing documents and statements of account. Non-lawyers may also attend to the registration of documents in person and, where permitted by the Registry of Deeds, electronically. If you intend to allow your staff to do any of these tasks, it is recommended that you review section 6.1 of the Code of Professional Conduct and Rule XII of the Law Society Rules for more information.

Links:

Direct Supervision Required: section 6.1-1 and commentary (Code of Professional Conduct)

Matters Requiring Professional Skill and Judgment: rule 12.02 (Law Society Rules)

Delegation: section 6.1-3 (Code of Professional Conduct)

Legal Assistants: rule 12.03 (Law Society Rules)

Legal Assistants: rule 12.06 (Law Society Rules)

Law Society Act, 1999

Legal Assistants: rule 12.05 (Law Society Rules)

Supervision of Legal Assistants: Rule XII (Law Society Rules)

Related Topics:

Letters of Engagement and Retainer Agreements

Communicating with Clients

Communicating with Other Parties

Unrepresented Parties

Documentation

Conflicts of Interest and Joint Retainers

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Conflicts of Interest and Joint Retainers

The relationship between a lawyer and client is grounded in a duty of undivided loyalty by the lawyer to the client and the “relationship may be irreparably damaged where the lawyer’s representation of one client is directly adverse to another client’s immediate interests.” (Code of Professional Conduct, section 3.4-1 commentary [5]).

As a consequence, lawyers are prohibited from acting in a conflict or continuing to act when a conflict arises unless it is authorized under the Code of Professional Conduct (see section 3.4-1). As a result, lawyers must consider whether there is a conflict of interest, or potential conflict of interest, between a client who is currently, or has been, represented by the lawyer or firm and any other party to the transaction before they accept a real estate file and throughout the life of the file.

Conflicts of interest apply not only to current clients but also to former clients: see section 3.4-10 of the Code of Professional Conduct for information and guidance. This rule is the reason why lawyers in real estate transactions must also consider whether there is a conflict based on the property that is the subject of the transaction. If, for example, you gained information while acting for a vendor or purchaser of property in the past that may affect a later transfer of that property (e.g. remediation for an environmental issue), you may be precluded from acting for one or both of the parties.

If there is a conflict, a lawyer is not permitted to represent the client unless there is consent from all affected clients and “the lawyer reasonably believes that he or she is able to represent the client without having a material adverse effect upon the representation of or loyalty to the client or another client.” For more information on consent, see section 3.4-2 of the Code of Professional Conduct and the practice resource entitled Conflicts of Interest.

A joint retainer exists when a lawyer acts for more than one client in a transaction, e.g. acting for both spouses when they are selling or purchasing property, acting for both the vendor and the purchaser in a transaction or acting for both the lender and the borrower (see sections 3.4-12 to 3.4-16 of the Code of Professional Conduct for specific restrictions on acting for both the borrower and lender). You may also have a joint retainer when you act on behalf of a title insurer and your client.

A conflict of interest is generally inherent in joint retainers because the interests of the clients may not overlap completely. Given the possibility of diverging interests and instructions, special precautions must be taken. As set out in section 3.4-5 of the Code of Professional Conduct, a lawyer acting for more than one party in a transaction must advise each client separately that:

  1. ) the lawyer has been asked to act for both or all of them;
  2. ) no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned; and
  3. ) if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may be required to withdraw completely.

Each client must be advised of this information so it is necessary to send separate correspondence to each client, even if that means sending two letters to the same address.

It is strongly recommended that you advise your clients of this information in writing – if there is any question in the future as to whether you complied with this section of the Code of Professional Conduct, it will be helpful to have information about the steps you took documented in the file.

You should also consider whether to recommend independent legal advice or independent legal representation before you accept a joint retainer, keeping in mind that the need for independent legal advice or independent legal representation increases where one client is less sophisticated than the other.

Once you have advised the clients about the consequences of a joint retainer, you must obtain written consent from each client to accept a joint retainer (see section 3.4-7 of the Code of Professional Conduct and commentary). Further guidance is provided in section 3.4-8 for situations where a contentious issue arises between clients in a joint retainer.

Given that there is more than one client in a joint retainer, it also means that you need to confirm instructions from all parties along the way to ensure that there is no divergence of interest or instructions between them.

Conflicts also arise when a lawyer has a personal interest in the transaction, for example, the lawyer owns part of the property that is being transferred. In those cases, there are requirements with respect to disclosure of the lawyer’s interest to the client – see sections 3.4-28 to 3.4-29 of the Code of Professional Conduct for more information.

Links:

Duty to Avoid Conflicts: section 3.4-1 (Code of Professional Conduct)

Acting for Borrower and Lender: sections 3.4-12 to 3.4-16 (Code of Professional Conduct)

Acting Against Former Clients: section 3.4-10 (Code of Professional Conduct)

Consent: section 3.4-2 (Code of Professional Conduct)

Conflicts of Interest

Joint Retainers: sections 3.4-5 to 3.4-9 (Code of Professional Conduct)

Transactions with Clients: sections 3.4-28 to 3.4-29 (Code of Professional Conduct)

Related Topics:

Letters of Engagement and Retainer Agreements

Communicating with Clients

Communicating with Other Parties

Unrepresented Parties

Documentation

Delegation of Work

Money Matters in a Real Estate Practice

Real Estate Practice Essentials

Communication

Ethics

(Posted: January 7, 2021)