banner banner

Money Matters in a Real Estate Practice

Like all practice areas, money matters in a real estate practice. This resource reviews some considerations to keep in mind when setting fees, giving quotes and advertising your fees as well as keeping books and records. Use these links to jump to a topic on this page:

Fees and Disbursements

Advertising and Fee Quotes

Books and Records

If you have any questions or want to chat about any information in this resource, feel free to contact the Director of Practice Management.

Fees and Disbursements

The amount a lawyer charges a client for a real transaction is a difficult question in a competitive market and it is a question for each lawyer to determine individually. The answer may depend on the nature of the transaction and various other factors. However, no matter what you decide to charge, you must also keep in mind several rules and obligations set by the Law Society.

As a starting point, the Code of Professional Conduct mandates that fees and disbursements that are charged and accepted must be fair and reasonable (section 3.6-1). The factors that go into what is considered fair and reasonable are found in commentary [1] under section 3.6-1 of the Code of Professional Conduct. See the practice resource entitled Reasonable Fees for more information as well.

A lawyer’s duty of loyalty and candour, all part of the fiduciary nature of the lawyer-client relationship, means that you are required to be upfront and honest with your client about financial matters (section 3.6-1 and commentary). You should provide your clients as much information as possible regarding fees, disbursements and interest and that information should be reasonably accurate. You should also explain how your fees will be determined and provide all of this information to your client in writing (see the Code of Professional Conduct, section 3.6-1 commentary [3]).

Lawyers should not provide unreasonable estimates in order to attract the client’s business. This approach may fall afoul of rule 8.05(1) which prohibits lawyers from providing information with respect to legal services that is misleading, deceptive or is likely to bring the member or profession into disrepute.

The duties of loyalty and candour to the client also translate into a requirement to disclose and get consent from clients to accept fees, rewards, costs, commissions, interest, rebates, allowances, or other compensation. Further guidance on this topic can be found in the commentary under section 3.6-1 of the Code of Professional Conduct as well as the practice resources entitled Commissions and Discounts, Payment of Disbursements and Expenses and Withdrawing and Transferring Funds from Trust Accounts. It is recommended that lawyers review all of these resources on a regular basis to ensure they are familiar with them.

Lawyers are also prohibited from directly or indirectly sharing, splitting or dividing their fees with a person who is not a lawyer and they cannot give any reward for the referral of clients or matters to a person who is not a lawyer (Code of Professional Conduct, section 3.6-7). Prohibitions that speak to real estate transactions in particular are found in rules 8.12(1) and (2):

  1. ) A member shall not provide to or receive from any real estate broker, agent or intermediary, any financial or other reward, direct or indirect, for directing or receiving clients to or from the real estate broker, agent or intermediary.
  2. ) A member shall not provide to or receive from any title insurer, agent or intermediary, any financial or other reward, direct or indirect for directing or receiving clients to or from the title insurer, agent or intermediary.

In addition, rule 8.09(2) mandates that lawyers are not permitted to give, or authorize any person to give, anything of value to a person (e.g. discount coupons) for recommending a lawyer’s services.

As noted in the practice resource entitled Commissions and Discounts,

“Lawyers must be careful where, for example, a title insurer pays a fee to the lawyer for work done. In that case, the lawyer is acting in a joint retainer for both the client and the title insurer. As such, rules with respect to joint retainers and consents apply (see section 3.4-5 of the Code of Professional Conduct). The payment from the title insurer is considered a fee for legal services and not a commission so the requirements for disclosure and consent found above will apply.”

When it comes time to bill the client, keep in mind the requirements of section 3.6-3 of the Code of Professional Conduct. It provides that you must clearly and separately detail the amounts charged as fees and disbursements and notes that you may charge as disbursements only those amounts that have been paid or are required to be paid to a third party by the lawyer on a client’s behalf.

Links:

Reasonable Fees and Disbursements: section 3.6-1 (Code of Professional Conduct)

Restrictions on Provision of Information: rule 8.05(1) (Law Society Rules)

Reasonable Fees

Commissions and Discounts

Payment of Disbursements and Expenses

Withdrawing and Transferring Funds from Trust Accounts

Division of Fees and Referral Fees: section 3.6-7 (Code of Professional Conduct)

Sharing of Fees: rules 8.12(1) and (2) (Law Society Rules)

Prohibited Activities: rule 8.09(2) (Law Society Rules)

Joint Retainers: section 3.4-5 (Code of Professional Conduct)

Statement of Account: section 3.6-3 (Code of Professional Conduct)

Related Topics:

Advertising and Fee Quotes

Books and Records

Letters of Engagement and Retainer Agreements

Practice Management Issues in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Managing Money

Advertising and Fee Quotes

How lawyers communicate about the legal services they provide and the fees they charge are regulated by the Law Society Rules and the Code of Professional Conduct. The starting point for marketing and communications around legal services is found in rule 8.03 and section 4.2-1. Together they state that a lawyer may market professional services as long as the marketing is

  • demonstrably true, accurate and verifiable;
  • not misleading, confusing or deceptive or likely to mislead, confuse or deceive; and
  • in the best interests of the public and consistent with a high standard of professionalism.

Rule 8.05(1) also explicitly states that lawyers shall not provide information in relation to legal services that

  • compares either directly or indirectly the lawyer’s services or abilities with the services or abilities of another lawyer;
  • creates an unreasonable expectation about the results possible;
  • contains any testimonials or endorsements concerning a lawyer;
  • discloses the names of clients unless the clients have consented in writing to the disclosure and to the manner of disclosure;
  • is not in good taste;
  • is not of a dignified nature or otherwise is such as to bring the member or the profession into disrepute; and
  • is incompatible with the respected profile of the society and the legal profession.

See also commentary [1] to section 4.2-1 of the Code of Professional Conduct.

Lawyers are permitted to advertise a preferred area of practice but are not permitted to advertise that they are a specialist, expert, leader or an established or experienced practitioner in any field of practice or generally (see rule 8.10 of the Law Society Rules).

When advertising about the fees they charge, lawyers must keep in mind the restrictions in rule 8.11 of the Law Society Rules and section 4.2-2 of the Code of Professional Conduct:

  • advertisements of fees must contain an accurate statement of the services provided for the fee and the circumstances in which higher fees may be charged;
  • the fact that disbursements, taxes, etc. are an additional cost must be made clear in the advertisement;
  • the advertising must be reasonably precise as to the services offered for the fee quoted;
  • advertisements must not use words or expressions such as “from…”, “minimum” and “…and up” when referring to the fees to be charged;
  • advertisements must not indicate that the price is a discount, reduction or a special rate; and
  • the lawyer is required to strictly adhere to the advertised price.

Links:

Declaration of Principle: rule 8.03 (Law Society Rules)

Marketing of Professional Services: section 4.2-1 (Code of Professional Conduct)

Restrictions on Provision of Information: rule 8.05(1) (Law Society Rules)

Preferred Areas of Practice: rule 8.10 (Law Society Rules)

Fee Advertising: rule 8.11 (Law Society Rules)

Advertising of Fees: section 4.2-2 (Code of Professional Conduct)

Related Topics:

Fees and Disbursements

Books and Records

Practice Management Issues in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

Law Office Organization and Administration

Books and Records

Lawyers who practise real estate law are required, like all other lawyers, to maintain financial records in accordance with Law Society Rules (see rule 5.02 and rule 15.03 in particular) as well as the Code of Professional Conduct. You are also required to have controls and systems in place to ensure proper record-keeping and accountability. Lawyers should be diligent and timely in reviewing financial records and be aware of the increasing prevalence of fraud.

Lawyers should also be familiar with the specific rules with respect to depositing, withdrawing and transferring trust funds, trust cheques, handing cash, credit card transactions and receiving funds electronically (Rule V generally and in particular, rule 5.03, rule 5.04 and rule 5.05 as well as Rule XV). There are practice resources on many of these topics and it is recommended that all lawyers review the rules and the practice resources on the finances of running a practice from time to time to ensure they are in compliance.

Links:

Maintenance of Records: rule 5.02 (Law Society Rules)

Record Keeping Requirements: rule 15.03 (Law Society Rules)

Uniform Trust Account Rules: Rule V (Law Society Rules)

Deposits and Withdrawals from the Trust Account: rule 5.03 (Law Society Rules)

Deposits in Trust Accounts: rule 5.04 (Law Society Rules)

Withdrawals and Transfers from Trust Accounts: rule 5.05 (Law Society Rules)

Cash Transactions and Record Keeping Requirements: Rule XV (Law Society Rules)

Managing Money

Related Topics:

Advertising and Fee Quotes

Fees and Disbursements

Practice Management Issues in a Real Estate Practice

Real Estate Practice Essentials

Real Estate Transactions

(Posted: January 6, 2021)