The Two-Lawyer Requirement for Transfers of Title to Real Property, Rules 3.4-16.7 to 3.4-16.9

1.  A vendor and purchaser of real property have signed an agreement of purchase and sale and have asked that I act for both of them in the transfer of title to real property. May I act for both?

An individual lawyer cannot act for or otherwise represent both the transferor and the transferee with respect to a transfer of title to real property except in certain limited defined circumstances and only if the lawyer is able to comply with the rules in Section 3.4 of the Rules of Professional Conduct regarding conflicts of interest [Rules 3.4-16.7 and 3.4-16.9]. These limited circumstances are: 

  • a transfer where the transferor and the transferee are the same and the change is being made to effect a change in legal tenure [ Rule 3.4-16.9(a) and subsection 5(2) of Ontario Regulation 19/99, Land Registration Reform Act]

  • a transfer where the transferor and the transferee are one and the same and the transfer is being made to effect a severance of land [Rule 3.4-16.9(a) and subsection 5(2) of Ontario Regulation 19/99, Land Registration Reform Act]

  • a transfer from an estate trustee, executor or administrator to a person who is beneficially entitled to a share in the estate [Rule 3.4-16.9(a) and subsection 5(2) of Ontario Regulation 19/99, Land Registration Reform Act]

  • a transfer where the transferor or the transferee is a government body including the Crown in Right of Canada, the Crown in Right of Ontario, a Crown corporation, an agency, board or commission of the Crown or a municipal corporation [Rule 3.4-16.9(a) and subsection 5(3) of Ontario Regulation 19/99, Land Registration Reform Act. No compliance with law statement is required to register this document to comply with the two lawyer requirement for transfers of title to real property]

  • a transfer that is being made to effect the transfer of an easement [Rule 3.4-16.9(a) and subsection 5(3) of Ontario Regulation 19/99, Land Registration Reform Act. No compliance with law statement is required to register this document to comply with the two lawyer requirement for transfers of title to real property]

  • a transfer where the transferor and the transferee are “related persons” as defined in section 251 of the Income Tax Act (Canada) [Rule 3.4-16.9(b). When registering the transfer the lawyer will make a compliance with law statement indicating that the transfer is being completed in accordance with the solicitor’s professional standards]

  • a transfer where the lawyer practices law in a remote location where there are no other lawyers that either the transferor or the transferee could without undue inconvenience retain for the transfer [Rule 3.4-16.9(c). When registering the transfer the lawyer will make a compliance with law statement indicating that the transfer is being completed in accordance with the solicitor’s professional standards].

Where the Rules permit an individual lawyer to act for both the transferor and the transferee in the transfer of title to real property, the lawyer must ensure that he or she complies with the rules in Section 3.4 on conflicts of interest including obligations with respect to joint retainers.

For more information see Steps to Assist in Complying withthe Two-Lawyer Requirement for Transfer of Title to Real Property – Rules3.4-16.7 to 3.4-16.9 – For Individual Lawyers.

 

2.  A vendor and purchaser of real property have signed an agreement of purchase and sale and have asked that I act for both of them in the transfer of title to real property. I have determined that I cannot do so and have referred one of the parties to another lawyer. What is the role of the other lawyer?

The other lawyer represents the client referred to him in the transaction and must assume complete professional responsibility for any document which he or she signs using the e-reg system [Rule 6.1-6.2].

 

3.  Do Rules 3.4-16.7 to 3.4-16.9 apply to mortgage transactions?

No. Rules 3.4-16.7 to 3.4-16.9 only apply to lawyers acting for the transferor and the transferee in the transfer of title to real property. Rules 3.4-12 to 3.4-16 apply to mortgage or loan transactions and these rules prohibit a lawyer from acting or otherwise representing both the lender and borrower in a mortgage or loan transaction except in certain limited defined circumstances.

 

4.  Am I precluded from acting for both the transferor and the transferee with respect to a transfer of an easement?

No, provided that you comply with the rules in Section 3.4 on conflicts of interest. Transfers of easements are an exception to the two lawyer requirement. Subsection 5(3) of Ontario Regulation 19/99 under the Land Registration Reform Act provides that no law statement is required to register this document. Before accepting a joint retainer to act for both the transferor and the transferee regarding a transfer of easement, the lawyer must ensure that there is no conflict of interest that would preclude the lawyer from accepting the joint retainer [Section 3.4]. In addition the lawyer must comply with the joint retainer rules [Rules 3.4-5 to 3.4-9].

 

5.  I am acting for the transferor in the transfer of title to real property; can my partner act for the transferee in the same transaction?

Yes, the rule permits different lawyers in one firm to act: one for the transferor and the other for the transferee provided that there is no violation of the rules in Section 3.4 [Rule 3.4-16.8]. The lawyers must ensure that there is no conflict of interest that would preclude them from accepting such a retainer. Where the two lawyers are in the same law firm, the clients are clients of the law firm and the retainer is a joint retainer. Prior to accepting such a retainer, the lawyers must ensure that they can meet their obligations under Section 3.4 and must comply with the Rules 3.4-5 to 3.4-9 on joint retainers.

For more information see Steps to Assist in Complying with the Two-Lawyer Requirement for Transfers of Title to Real Property, Rules3.4-16.7 to 3.4-16.9 – For Lawyers in the Same Firm.

 

6.  What are the lawyer’s obligations in a joint retainer?

Joint Retainers are dealt with in Rules 3.4-5 to 3.4-9. A joint retainer is a retainer in which the lawyer accepts employment from more than one client in a matter or transaction whether or not a conflict of interest exists. The Rules of Professional Conduct (Rules) impose certain obligations on the lawyer both prior to accepting a joint retainer and during the course of the joint retainer.

Obligations before accepting the joint retainer

Before accepting a joint retainer, the lawyer must make certain disclosure to the clients and obtain the clients’ informed consent.

The lawyer must advise the clients that: 

  • the lawyer has been asked to act for both or all of them

  • no information received in connection with the matter from one can be treated as confidential so far as any of the others are concerned, and

  • if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may have to withdraw completely [Rules 3.4-5 to 3.4-9].

The client’s consent must be in writing and signed by each of the clients or may be oral provided that the lawyer sends a letter to each person giving the oral consent confirming his or her consent as soon as practicable [Rule 1.1-1 – Definition of Consent].

Independent Legal Advice

In some cases the lawyer should recommend that the client obtain independent legal advice before accepting a joint retainer. Examples of these situations would include a situation where one of the parties is less sophisticated or more vulnerable than the other [Commentary to Rule 3.4-5[1]].

If the lawyer has a continuing relationship with a client for whom the lawyer acts regularly, before the lawyer accepts the joint retainer for that client and another client in a matter or transaction, the lawyer must advise the other client of the continuing relationship and recommend that the client obtain independent legal advice about the joint retainer [Rule 3.4-6].

For more information see the Sample Joint Retainer Acknowledgment and Consent for Use in Real Estate Transactions.

 

7.  The Rules permit a lawyer or lawyers in the same firm in certain circumstances to represent both the transferor and the transferee with respect to the transfer of title to real property. What are some examples of situations where it would not be prudent for a lawyer or lawyers in a law firm to accept a joint retainer to act for both these parties?

The commentary to Rule 3.4-7 cautions lawyers that although all of the parties concerned may consent to the joint retainer, a lawyer should avoid acting for more than one client when it is likely that an issue contentious between them will arise or their interests, rights or obligations will diverge as the matter progresses.

The following are examples of situations where it would not be prudent for a lawyer or lawyers in the same firm to act on both sides of the transaction: 

  • the transferor and the transferee are spouses of one another and are involved in a matrimonial dispute and are not separately represented in the matrimonial dispute, or 

  • the parties have not agreed on the terms of the transaction.

The following are examples of situations where the lawyer or lawyers in the same firm should consider either not acting for both sides in the transaction or having the more vulnerable party in the transaction obtain independent legal advice on the transaction: 

  • one of the parties to the transaction is receiving a greater benefit than the other party to the transaction, or

  • the transferor and the transferee are related parties and one of the parties is more vulnerable than the other party.

Although the Rules permit lawyers in the same firm or an individual lawyer in certain circumstances to represent both the purchaser and vendor in a real estate transaction, lawyers should use care when accepting such retainers. The probability of a conflict of interest arising between a purchaser and a vendor in a real estate transaction is high. The interests of each of these clients might differ and the advice that the lawyer would give to each client might not be the same, and may even be conflicting. Where there is a pre-existing relationship between the lawyer and one of these clients, the lawyer might prefer the interests of that one client to the other. Finally conflicts often arise unexpectedly. If a conflict between the parties were to arise on the date of closing, there might be insufficient time for each of the parties to retain separate lawyers and their rights might be prejudiced.

 

8.  Rule 3.4-16.9(c) provides that in certain circumstances a lawyer may act for both the transferor and the transferee in the transfer of title to real property where the lawyer practices law in a remote location and where there are no other lawyers that either the transferor or the transferee could without undue inconvenience retain for the transfer. What is a “remote location”?

The term “remote location” is not specifically defined in the Rules. Generally, the term “remote” implies that there is some element of physical distance. Rule 3.4-16.9(c) is intended to capture situations where there are no other lawyers in the location where the lawyer practises or in its vicinity that either the transferor or the transferee could without undue inconvenience retain for the transfer. If there are such other lawyers, the situation will not fall within this Rule. It should be noted that the term “undue inconvenience” in Rule 3.4-16.9(c) refers to the “undue inconvenience” of the client and not of the lawyer.

 

9.  Rule 3.4-16.9(b) provides that in certain circumstances an individual lawyer may act for both the transferor and the transferee if the parties are “related persons” as defined in section 251 of the Income Tax Act. How do I determine if the parties are “related persons” with the meaning of the Act?

Lawyers should refer to the definition of “related persons” in section 251 of the Income Tax Act to determine whether the transferor and the transferee are “related persons” within the meaning of the Act.

Please refer to the materials entitled “Understanding the Two-Lawyer Rule: “The “Related Persons” Exception” by Chris Anderson for further information regarding section 251 of the Income Tax Act including examples of “related persons”.

 

10.  Generally, transfers of title must be signed for completeness by two different lawyers: one acting for the transferor and one acting for the transferee. Where can I obtain information about the electronic registration requirements and law statements?

Ontario Regulation 19/99 under the Land Registration Reform Act contains information on the requirements.

 

11.  If the purchaser and the vendor are represented by different lawyers in a real estate transaction involving a transfer of title to real property and none of the exceptions to the two-lawyer requirement contained in Rule 3.4-16.9 apply, is one lawyer permitted to sign the transfer on behalf of both of the transferor and the transferee by making the statement that this transaction is being completed in accordance with the solicitor’s professional standards?

No. This transaction is not being completed in compliance with the lawyer’s professional standards. Rule 3.4-16.7 requires that there be two lawyers for transfers of title: one for the transferor and one for the transferee unless one of the exceptions to the two-lawyer requirement in Rule 3.4-16.9 applies. In this situation, none of the exceptions apply and the lawyer signing the transfer on behalf of both parties would be acting for both parties.

 

12.  I am acting for a client with respect to the transfer of title to real property. Am I permitted to retain a conveyancer to assist me in the transaction?

Yes, a lawyer may retain a non-lawyer to assist him or her in the completion of the real estate transaction. When doing so, the lawyer must comply with his or her obligations regarding delegation and supervision. When a lawyer delegates tasks to a non-lawyer, the lawyer assumes complete professional responsibility for his or her practice of law and must directly supervises the non-lawyer to whom the tasks are delegated, in accordance with Section 6.1 of the Rules and By-Law 7.1.

It should be noted that only a lawyer entitled to practise real estate law may sign for completeness documents containing compliance with law statements. Rule 6.1-5 prohibits a lawyer from sharing his or her diskette or pass phrase used to access the electronic land registration system with others including a non-lawyer employee.

Most transfers of title contain compliance with law statements and must be signed by lawyers for completeness. Non-lawyers may sign these documents for release.

In addition, the Rules provide that a lawyer may not assign to a non-lawyer the ultimate responsibility for reviewing a title search report or documents before signature or the review and signing of a letter of requisition or title opinion or reporting letter to the client.

 

13.  Where can I obtain information regarding the new LAWPRO real estate insurance coverage?

Information on the LAWPRO real estate practice coverage is available on the LAWPRO website at: http://www.lawpro.ca/insurance/Practice_Type/REPCO_coverage.asp.

This information includes FAQs about the real estate practice coverage and a self-assessment tool to assist lawyers to determine whether the coverage is required.