Forms 9D and 9E


What is the purpose of Forms 9D and 9E?
I just learned about the Forms. Should I now prepare Forms 9D and 9E for completed mortgage transactions?
Can Form 9E be replaced by a reporting letter?
When are Forms 9D and 9E required?
Am I required to complete Forms 9D and 9E if my lender clients arrange their own mortgage loans, they pay the borrower directly, and I only register the mortgage documents?
Am I required to complete Forms 9D and 9E if I act for a lender in a vendor take back mortgage or renewal/extension of a vendor take back mortgage?
Am I required to complete Forms 9D and 9E if I act for a lender where the mortgage is arranged through a mortgage broker?
Am I required to complete Forms 9D and 9E if I act for the lender in a renewal of a mortgage?
Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is less than $50,000?
Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is under $6,000?
Am I required to complete Forms 9D and 9E if I lend my own money to a client?
Am I required to complete Forms 9D and 9E if I act for my spouse, who lends money to a client?
Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is from a self-directed R.R.S.P.?
Am I required to complete Forms 9D and 9E if I am the sole estate trustee of an estate and I lend or invest funds on behalf of the estate?
Am I required to complete Forms 9D and 9E if I act for the borrower and the lender has independent legal representation?
Am I required to complete Forms 9D and 9E if I act for the lender but funds flow from my spouse's brokerage company to the borrower?


Q: What is the purpose of Forms 9D and 9E?

A: The Forms were developed to ensure documented communication between lawyers and their clients. Written instructions reduce allegations of miscommunication and failure to follow client instructions. The Law Society's goal is to ensure that the public is protected and to reduce claims and complaints by lender clients to the LawPRO® and the Compensation Fund. Form 9D contains the written instructions from the lender. It crystallizes the transaction and is available for confirmation purposes in the event of a claim to the LawPRO®. Form 9E is a report on the investment for the lender. The Forms must be completed for any mortgage transactions in which the lawyer acts for or receives funds from a lender and the Forms are required by section 24(1) of By-Law 9. Section 24(2) of By-Law 9 outlines circumstances under which the forms are not required. 

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  Q: I just learned about the Forms. Should I now prepare Forms 9D and 9E for completed mortgage transactions?

 

A: The fact that the prescribed Forms were not completed in compliance with By-Law 9 must be disclosed in your Annual Report to the Law Society of Upper Canada.. However, you need not prepare Forms for completed transactions as this would not meet the purpose of affording protection to the clients at this late time. In future, ensure Form 9D is completed and signed by the investor(s) before mortgage funds are advanced. You must use the Forms for any subsequent mortgage transactions in which you act for or receive funds from a lender and the Forms are required by the By-Law. Section 24(2) of By-Law 9 outlines circumstances under which the forms are not required.

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 Q: Can Form 9E be replaced by a reporting letter?

A: Yes, provided that the reporting letter contains a response to every question in the prescribed Form. Where an item on Form 9E is not applicable, it should nonetheless be included in the reporting letter with an appropriate notation. See section 24(11) of By-Law 9. 


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 Q: When are Forms 9D and 9E required?

A: The Forms are required whenever a lawyer "acts for or receives money from a lender", as outlined in section 24(1) of By-Law 9. A lender is defined in section 1(1) of By-Law 9 as "a person who is making a loan that is secured or to be secured by a charge, including a charge to be held in trust directly or indirectly through a related person or corporation."

However, section 24(2) sets out the transactions in which the Forms are not required. The exceptions are

  • the lender (note that all three conditions must apply)
    • is a bank listed in Schedule I or II to the Bank Act (Canada), a licensed insurer, a registered loan or trust corporation, a subsidiary of any of them, a pension fund, or any other entity that lends money in the ordinary course of its business
    • has entered a loan agreement with the borrower and has signed a written commitment setting out the terms of the prospective charge, and 
    • has given the lawyer a copy of the written commitment before the advance of money to or on behalf of the borrower
     
  • the lender and borrower are not at "arm's length", where "arm's length" and "related" persons are defined in section 1(1) of By-Law 9 as having the same meanings as contained in section 251 of as defined in the Income Tax Act (Canada)

  • the borrower is an employee of the lender or of a corporate entity related to the lender

  • has executed the "Investor/Lender Disclosure Statement for Brokered Transactions", approved by the Superintendent under subsection 54(1) of the Mortgage Brokerages, Lenders and Administrators Act, 2006and has given the lawyer written instructions, relating to the particular transaction, to accept the executed form as proof of the loan

  • the total amount advanced by the lender does not exceed $6,000, or

  • the lender is selling real property to the borrower and the charge represents part of the purchase price (i.e. a vendor take back mortgage)

Depending on the circumstances, you may consider it advisable to use Forms 9D and 9E even if one of the exceptions applies to a particular mortgage transaction.

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 Q: Am I required to complete Forms 9D and 9E if my lender clients arrange their own mortgage loans, they pay the borrower directly, and I only register the mortgage documents?

A: Yes. The lender clients are looking to the lawyer for protection and assurance that there is adequate security for their loan. Form 9D ensures that the clients' instructions are specified in writing so that no allegation of failing to follow instructions can arise. Section 24(1) of By-Law 9 states that the Forms are required of a lawyer who acts for a lender or receives money from a lender. Section 24(2) of By-Law 9 outlines circumstances under which the forms are not required.

If the lender comes to you after the transaction is completed (i.e. the lender has already given the money to the borrower) and instructs you to register a mortgage to secure the loan, you should still have the lender sign the completed Form 9D to confirm your instructions. Because of the requirement in section 24(1)(a) of By-Law 9 that Form 9D be signed by the lender prior to the advance of the mortgage funds, you should also have the lender acknowledge in writing that the mortgage funds had already been advanced prior to consulting you and before Form 9D was prepared.

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 Q: Am I required to complete Forms 9D and 9E if I act for a lender in a vendor take back mortgage or renewal/extension of a vendor take back mortgage?

A: No. Neither Form 9D nor 9E is required on a routine vendor take back mortgage as this type of transaction is exempted by section 24(2)(f) of By-Law 9: "the lender is selling real property to the borrower and the charge represents part of the purchase price". Because of the nature of the transaction, the lender/vendor can be expected to be aware of the security and is frequently intimately involved in the negotiation of the terms of the mortgage. On a renewal of a vendor take back mortgage, the Forms are not required if the transaction is exempted pursuant to section 24(8) of By-Law 9. Nonetheless, a detailed reporting letter must be provided within the time required by rule 3.2-9.8 of the Rules of Professional Conduct.


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 Q: Am I required to complete Forms 9D and 9E if I act for a lender where the mortgage is arranged through a mortgage broker?

A: While Forms 9D and 9E would normally be applicable, the transaction may be exempt provided that the lender [section 24(2)(d) of By-Law 9

  • has executed an "Investor/Lender Disclosure Statement for Brokered Transactions", approved by the Superintendent under subsection 54(1) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, and
  • has given the lawyer written instructions, relating to the particular transaction, to accept the executed form as proof of the loan agreement

For the transaction to be exempt from the completion of the Forms, both of the above conditions must be met.

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 Q: Am I required to complete Forms 9D and 9E if I act for the lender in a renewal of a mortgage?

A: No, unless the renewal involves [sections 24(4) to (8) of By-Law 9]  

  • making a change in the priority of the charge that results in a reduction of the amount of security available to it
  • making a change to another charge of higher priority that results in a reduction of the amount of security available to the lender's charge
  • releasing collateral or other security held for the loan
  • releasing a person who is liable under a covenant with respect to an obligation in connection with the loan

Section 24(8) of By-Law 9 states that, notwithstanding the occurrence of any of the four events listed above, new Forms are not required if the original transaction was exempted on any basis except on the basis that it was arranged by a mortgage broker. However, if the transaction is not exempted under section 24(2) of By-Law 9 and the Forms in the original transaction had not been prepared for any reason, they must be prepared on the renewal.

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 Q: Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is less than $50,000?

A: Yes. As outlined in section 24(1) of By-Law 9, if the total amount to be advanced by the lender exceeds $6,000 the Forms must be completed. The $50,000 limit applies to a mortgage or loan transaction in which you may be permitted to act for both lender and borrower, per rules 3.4-12 and 3.4-14 of the Rules of Professional Conduct.

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 Q: Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is under $6,000?

A: No. As outlined in section 24(2)(e) of By-Law 9, if the total amount to be advanced by the lender does not exceed $6,000 the Forms need not be completed.

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 Q: Am I required to complete Forms 9D and 9E if I lend my own money to a client?

A: No, as there is no independent lawyer-client relationship with the lender (i.e. you).

Unless one of the exceptions outlined in rule 3.4-14 applies, you must not act for the borrower in the mortgage transaction. Even where one of the exceptions will allow you to also act for the borrower client in the mortgage transaction (e.g. they are a person "related" to you, or the loan is less than $50,000), lending money to your client puts you in a potential conflict position with your client, particularly if the mortgage goes into default. The definition of a conflict of interest is contained in rule 1.1-1 of theRules of Professional Conduct. As set out in the commentary to rule 3.4-1[8](c), the financial interest of a lawyer is an example if a conflict of interest. Therefore, it is recommended that the terms of any such loan be reduced to writing, the borrower client be informed of the potential conflict of interest and obtain independent legal representation or, at a minimum, independent legal advice on the mortgage or loan. In situations where the borrower chooses to proceed as an unrepresented party, you must also comply with rule 7.2-9 regarding unrepresented persons.


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 Q: Am I required to complete Forms 9D and 9E if I act for my spouse, who  lends money to a client?

A: Yes, as you are effectively acting on behalf of your spouse (the lender client) in the mortgage transaction.

Unless one of the exceptions outlined in rule 3.4-14 applies, you must not act for the borrower in the mortgage transaction. Even where one of the exceptions will allow you to act for your spouse and the borrower client in the mortgage transaction (e.g. they are a person "related" to you, or the loan is less than $50,000), your spouse lending money to your client puts you in a potential conflict position with your client, particularly if the mortgage goes into default. The definition of a conflict of interest is contained in rule 1.1-1 of the Rules of Professional Conduct. As set out in the commentary to rule 3.4-1[8](c), the financial interest of a lawyer is an example of a conflict of interest. Therefore, it is recommended that the terms of any such loan be reduced to writing, that the borrower client be informed of the potential conflict of interest and obtain independent legal representation or, at a minimum, independent legal advice on the mortgage or loan. In situations where the borrower chooses to proceed as an unrepresented party, you must also comply with rule 7.2-9 regarding unrepresented persons.


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 Q: Am I required to complete Forms 9D and 9E if I act for the lender where the mortgage loan is from a self-directed R.R.S.P.?

A: Yes, as the funds belong to the individual plan holder. The funds do not belong to the financial institution, nor does the financial institution have the authority to direct the investment. In these transactions, the financial institution is a bare trustee, which holds or moves the investment funds at the direction of the plan holder. It is the plan holder who is the directing mind of the investment. Thus, the plan holder must sign Form 9D before mortgage funds are advanced. The plan holder is the party who would suffer a loss, not the financial institution. And, unless one of the exceptions outlined in rule 3.4-14 applies, the borrower must have independent legal representation in the mortgage transaction.

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 Q: Am I required to complete Forms 9D and 9E if I am the sole estate trustee of an estate and I lend or invest funds on behalf of the estate?

A: Yes. As the estate trustee you have a fiduciary duty to the estate and investments must be made pursuant to the Trustee Act and/or the testator's will. Form 9D details the lawyer's instructions on the mortgage loan in writing and is available in the file to support adherence to the instructions of the will or the Act. And, unless one of the exceptions outlined in rule 3.4-14 applies, the borrower must have independent legal representation in the mortgage transaction.

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 Q: Am I required to complete Forms 9D and 9E if I act for the borrower and the lender has independent legal representation?

A: No. The lender's lawyer is responsible for completing the required Forms. Section 24(2) of By-Law 9 outlines circumstances under which the forms are not required.

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 Q: Am I required to complete Forms 9D and 9E if I act for the lender but funds flow from my spouse's brokerage company to the borrower?

A: Provided that you comply with the requirements of section 24(2)(d) of By-Law 9, (i.e. the lender has executed an "Investor/Lender Disclosure Statement for Brokered Transactions", approved by the Superintendent under subsection 54(1) of theMortgage Brokerages, Lenders and Administrators Act, 2006, and has given the lawyer written instructions for the particular transaction to accept the executed form as proof of the loan agreement), the transaction would not require completion of Forms 9D and 9E. However, to address the potential conflict of interest, you must disclose to the lender client your relationship with the brokerage firm. You should consult section 3.4 of the Rules of Professional Conduct to ensure you are in compliance.

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