Lawyers being offered these incentives should be mindful of the Rules of Professional Conduct:

• Rule 2.02 (11): A lawyer shall not receive any compensation, whether directly or indirectly, from a title insurer, agent or intermediary for recommending a specific title insurance product to his or her client.
• Rule 2.02 (12): A lawyer shall disclose to the client that no commission or fee is being furnished by any insurer, agent or intermediary to the lawyer with respect to any title insurance coverage.

The commentary goes on to address the fact that there cannot be acceptance of any hidden fees by the lawyer, including the lawyer's law firm, any employee or associate of the firm, or any related entity.

TitlePLUS Focus: A TitlePLUS newsletter
This new publication, launched by TitlePLUS for its subscribers and other real estate lawyers, provides an overview of recent developments at TitlePLUS, including insights into some of the claims and the advantages of TitlePLUS legal services coverage. It also provides tips on how to make the best use of TitlePLUS in real estate transactions. To obtain a copy, e-mail titleplus@lpic.ca or call (416) 598-5899 or 1-800-410-1013.

TitlePLUS insures farm properties
TitlePLUS has launched its Farms program, providing TitlePLUS coverage for purchases and refinancings of farm properties valued at up to $1 million. The Farms program applies to all farm properties, irrespective of whether the farm is an operating business. Coverage for these properties is available only through the TitlePLUS Dial-In program at (416) 598-5899 or 1-800-410-1013. Premiums will vary based on the purchase price or mortgage amount.

RealtiPLUS™2.5, the one-stop desktop, harnesses technology for real estate bar
The June launch of RealtiPLUS 2.5 - "the integrated real estate desktop" - helped lawyers take a major step towards the online, fully automated office of the future.

The new software conveyancing program, developed jointly by TitlePLUS and CAKEsoft Inc., provides lawyers with a single, fully unified desktop from which they can perform virtually all of the functions involved in purchase, sale and mortgage transactions, including:

• production of documents, such as search and inquiry letters, closing documentation, and reporting letters;
• file management;
• database access and management;
• online electronic search of properties in Teraview®;
• online, seamless application for TitlePLUS title insurance protection for the transaction.

RealtiPLUS significantly streamlines real estate practice, reducing the time it takes to complete transactions from data entry to generation of closing documents by up to 30 per cent.

Lawyers using RealtiPLUS work on a single data platform, entering all information pertaining to the transaction only once; this data automatically pre-populates all other relevant functions, such as the TitlePLUS application, various search and inquiry letters that are generated by the system, and even the Teraview® search windows.

The software produces the appropriate requisition letters, reporting letters and closing documents. To facilitate the move to electronic registration, RealtiPLUS 2.5 also automatically generates the companion paper documents for e-reg™, including the Document Registration Agreement (DRA). Extensive databases, template letters, forms and applications, and an up-to-date precedent library further streamline the process.

A major advantage of RealtiPLUS 2.5 is its integration with Teraview®, the online search facility. As well as pre-populating the Teraview® search windows, RealtiPLUS 2.5 imports data from an online property search back into the system. Now in testing is the facility to pre-populate the e-reg™ software with data from the lawyer's electronic RealtiPLUS file, thus further reducing the need for duplicate entry.

For more information on RealtiPLUS, visit www.titleplus.ca/lawyers/default.asp

TitlePLUS launches online insurance application at www.LawyerMortgage.com
TitlePLUS has taken the first major step towards the era of online real estate deals with the launch of LawyerMortgage.com, a website that allows lawyers to apply online, in real time, for TitlePLUS coverage for their mortgage-only transactions.

The site, a joint initiative of TitlePLUS and Cakesoft Inc., guides lawyers through the application process, and generates all of the required title insurance documentation associated with the transaction.

Consumers and lawyers benefit from LawyerMortgage.com in numerous ways:

• Streamlined due diligence: LawyerMortgage.com significantly reduces the amount of time and associated costs that lawyers spend on searches and inquiries, requiring, for example, only one subsearch of title, in most circumstances. This feature, combined with the ease of use of the online application itself, reduces the amount of time the lawyer spends on the actual transaction, while still ensuring the consumer receives professional service and independent legal advice.
• Cost savings: The premium for LawyerMortgage.com title insurance coverage is only $60 (plus a $5 processing fee and taxes) - significantly less than the cost of obtaining title insurance coverage for mortgage-only transactions in the conventional manner.
• Funds may be advanced instantly: Because lawyers using the site are working in a live environment, they almost always receive instant approval of title insurance coverage and the authorization to advance to clients the required cash before the mortgage is registered on title. Lenders have the security they need through the title insurance policy, which is effective as of the advance of funds.
• 24/7 access: Because the application process is electronic and easy to use, lawyers can quickly complete their work anywhere, anytime.

A Tale of Two Files: E&O vs TitlePLUS

How can TitlePLUS make a difference?
That's the question often asked of TitlePLUS by real estate lawyers. To answer this question, here is an actual case from the LPIC insurance claims files that demonstrates how these situations could have been resolved more quickly and at less cost, especially to the lawyer involved, if TitlePLUS had been used.

The case:
A TitlePLUS solicitor acted on a purchase under a power of sale. Title revealed a second mortgage in favour of a gas company to secure a furnace lien (approximately $3,500). The solicitor assumed that this was a second charge and was therefore "cut out" by the power of sale. The solicitor failed to consider the effect of the PPSA, which gives priority to a conditional sales agreement where the security interest attaches prior to the chattel becoming a fixture.

The role TitlePLUS played:
This matter was covered under the TitlePLUS Legal Services coverage and a discharge was obtained at no cost to the insured purchaser or the solicitor. Had this matter not been a TitlePLUS transaction, the priority of the lien would have resulted in a claim against the solicitor's E&O coverage. Assuming the standard DEDUCTIBLE of $5,000, the indemnity to discharge the lien would have come completely from the solicitor's own funds.

GoodStart business keeps rolling in
To date, TitlePLUS has provided close to 2,000 home buyer referrals to lawyers participating in GoodStart, TitlePLUS' all-inclusive program for closing new home and condo development purchases. A majority of the referrals - close to 80 per cent - were made via the Locate a Lawyer function on the revamped TitlePLUS website. This feature lets visitors to the site access a list of lawyers participating in the GoodStart either by postal code or by development name.

TitlePLUS has captured close to 20 per cent of the new development market through GoodStart. Thirty developers, including industry leaders such as Tridel, Greenpark, Heron and Fram participate in the program; more than 60 developments, representing upward of 12,000 new home and condominium units across Ontario, are registered in the TitlePLUS initiative.

Introduction
The Lawyers’ Professional Indemnity Company ("LPIC") provides the mandatory professional liability program for all lawyers practicing in Ontario. In recent years LPIC has given significant attention to the Ontario real estate bar. We wish to share insights we have gained, in the hope that they will assist you in considering whether the conduct of real estate transactions should remain within the purview of lawyers exclusively.

The Pivotal Role of the Lawyer
Because of the historical manner in which the land registration systems developed in Ontario, and because virtually all transactions relating to land are based on a contract between two parties, lawyers have been central to the completion of a transaction and the giving of an opinion regarding title. Most tasks relating to the completion of a real estate transaction have been delegated to lawyers by all involved parties. Lawyers assume responsibility for ensuring that the transaction is completed according to the agreement of purchase and sale or mortgage commitment and in addition, in accordance with the practical requirements of the client. Lawyers are the "quarterback" of the real estate transaction in Ontario.

The existence of a lawyer-client relationship involves obligations that extend far beyond the completion of technical or mechanical tasks. The lawyer must act in the best interests of the client, in accordance with the Rules of Professional Conduct. The lawyer, in the role of councilor (or advisor) and fiduciary, must protect all of the client’s rights.

Agreements of purchase and sale and mortgage commitments contain rights and obligations that involve much more than the issue of good title. Lawyers appreciate that they are responsible for the protection of the client’s rights under the contract in an environment of changing laws and responsibilities, and that their duties are not limited to assuring good title.

The lawyer must disclose all risks and all material information to a client and assist the client in determining that all obligations and rights contained in the agreement have been satisfied. The lawyer assesses the terms of the agreement, takes charge of the transaction, guides it to completion, and advises the client of risks and responsibilities that flow from the agreement itself. The lawyer evaluates degrees of risk associated with the transaction; understands real estate ownership; advises about the agreement of purchase and sale or mortgage commitment; advises about survey issues; undertakes numerous off-title inquiries relating to potential unregistered liens, rights, deficiencies or charges; advises about title; advises about the manner of being named as owner; advises about rights and obligations as borrower or lender; advises when there is a dispute or problem and how to proceed; and advises about other types of property ownership.

Breadth of Knowledge Required
In theory one could impose on paralegals the same insurance and professional conduct requirements as lawyers bear, plus added requirements of financial bonding and mandatory continuing education. However, it would be difficult at the outset to equip them with the breadth of knowledge necessary to assume ultimate responsibility for real estate transactions without imposing a full law school education. Much of real estate practice is about issue identification, risk assessment and advice-giving; it is not simply about how to fill out a statutory form or read a computerized title printout.

The issue identification undertaken by lawyers involves a number of areas of the law, including the following:

• contract law, because of the need to evaluate agreements of purchase and sale and mortgage commitments;
• planning and environmental law, because of the high degree of regulation of land in Ontario today;
• debtor and creditor law, because of concerns regarding protection of the client’s assets and possible liens/conflicting interests in the property;
• mortgage enforcement law, for the same reasons as above;
• construction law, because of possible liens on title or the clients’ plans for the property;
• civil litigation, because the client may need a vendor and purchaser’s motion to determine its rights under the contract or resolve a requisition dispute, or advice on the remedies available for a failed agreement of purchase and sale;
• wills and estates, in order to evaluate the strength of past estate conveyances and to advise the client of their own estate-planning options when acquiring a significant asset;
• corporate law, because of the need to determine issues relating to corporations on title and to advise clients on their rights when dealing with corporate parties;
• commercial law, to advise of the implications of personal property liens;
• residential tenancy law, to obtain vacant possession or advise on rent legality;
• family law, because of spousal rights in the matrimonial home and liens relating to support obligations.

In other words, practicing in the field of real estate transactions is not about knowing real estate law, in the sense of how to read a title search and draft a transfer or mortgage. Those functions are routinely, in many law firms, delegated to law clerks or experienced legal secretaries. However, the lawyer provides an invaluable review function (the "issue identification" role) at key points in the transaction, at which point he or she is expected to note and act upon problems in the deal. For example, the purchaser’s lawyer will normally, at a minimum:

• review the agreement of purchase and sale and advise the client of any problematic aspects to it;
• review the choice of off-title searches (or enforce adherence by the staff to a pre-approved list of searches, based on property type);
• review the title search and finalize the requisitions on title;
• review the mortgage commitment and advise the client of any problematic aspects to it;
• advise the client about the implications of how they are taking title;
• review the closing documents and advise the client when signing them;
• advise the clients of any title issues and seek instructions;
• review and sign the reporting letter.

All of these functions are carried out in an environment where statute law changes regularly and the Courts re-define the standard of care almost monthly. To expect a service provider without a common law legal education to reasonably stay current with the externally imposed obligations of real estate practice is unrealistic, in our view.

Examples of Reliance on Legal Input

1. TitlePLUS Program

As an example of the need for legal input in the transaction, please consider our TitlePLUS program. TitlePLUS is an optional title & legal services insurance program to which lawyers may subscribe. It allows them to obtain TitlePLUS insurance policies in favor of their purchaser and lender clients on residential transactions. The clients then have direct recourse to LPIC as the insurer if they suffer a loss related to title, off-title matters or other services of the lawyer for which an obligation would be imposed by law (in other words, any E & O liability the lawyer may have in the transaction).

Although the guiding premise of the TitlePLUS program was to streamline the work of the lawyer and underwrite the revised process with the insurance policy, there are nevertheless 118 fields/inquiries in the software program (for automated applications) that may have to be answered, depending on the circumstances.

Even with a very sophisticated, interactive software program effectively overseeing the workflow on the transaction, there are a number of issues raised by the software that only the lawyer should be answering. For example, please consider the following inquiries:

• Does the property comply with the subdivision control provisions of the Planning Act?
• Do you have any concerns regarding the availability of a legal right of access to the property?
• Do you have any concerns arising from the fact that the property fronts on a lake or river?
• Is independent legal advice required for any mortgage guarantee being given?
• Obtain and review estoppel certificate.
• Confirm that the purchaser is obtaining the appropriate legal rights in any parking/locker or other ancillary interests.
• Indicate if you are aware of any survey-related deficiencies or defects affecting the property.
• Prepare schedule setting out opinion on lawfulness of rents for Acknowledgment and Direction.
• Confirm that survey coverage under the policy meets mortgage insurer’s requirements.
• Identify all title defects revealed by search not previously entered.
• Identify any unresolved mortgage lender concerns.

Because of the importance of "lawyer" advice in the transaction, TitlePLUS requires that the lawyer review the mandatory Acknowledgment and Direction (generated by the software) with the client before closing.

2. Use of Compliance with Law Statements

The regulations for the implementation of electronic registration by the Ministry of Consumer and Commercial Relations themselves recognize the breadth of knowledge and responsibility of the lawyer. The regulations allow lawyers to make "compliance with law statements" on which the government will rely to certify title in the Land Titles system. The statements involve the lawyer using his or her professional knowledge to reach conclusions regarding:

• mortgage enforcement proceedings;
• estate conveyancing matters and the interpretation of wills; and
• the status of court orders.

This privilege is not accorded to other citizens, who would still be required to present the necessary paper evidence for review by the Registrar.

Troublesome Aspects of Real Estate Practice
The fact that the non-title aspects of the transaction are not necessarily easy to handle is attested to by LPIC’s claims experience in the residential urban real estate area. In the period from January, 1996 to December, 1999, the "soft" issues relating to residential urban real estate claims far out-weighed the technical title issues, as follows:

The above statistics are clear evidence that there are difficult aspects to handling a residential real estate transaction, and they are not the title aspects.

The largest dollar loss (approximately $8,050,000) in the years 1996 to 1999 arose from lawyers acting for more than one party on a transaction. This is cogent evidence that even allowing non-lawyers to act on non-arm’s length transactions or registrations would be inadvisable.

Current State of Real Estate Practice as a Business
There are approximately 4800 lawyers in Ontario who report "real estate" as their primary or secondary area of practice. They are broadly dispersed throughout the province.

As the briefest glance at the legal press will reveal, competition in this area is fierce and generates much commentary by the Bar. Legal fees for the provision of real estate services have tumbled throughout the 1990s. The first area of decline was for mortgage refinance services. Competition in the refinance market was encountered from the document production companies and the title insurers, both of whom were providing information and documents (but not advice or title opinions) to the banks. (Of course, this was in an environment where large, sophisticated lender-clients had in-house legal counsel approving standard-form documents and setting service requirements by contract.)

If a lawyer wishes to compete for refinance business in the year 2000, he or she will likely have to provide an all-inclusive, package price for legal services, disbursements, and a title insurance policy in the range of $350 to $500. The lawyer likely receives fees from the transaction of $150 to $250, after the payment of disbursements (including the title insurance premium).

The purchase and sale markets are now increasingly being affected by the desire of lenders and builders to "pre-package" legal services for their customers. The TitlePLUS GoodStart program is an example of a package available to new home or condominium purchasers. For approximately $800 (excluding registration fees and taxes), the purchaser obtains legal services for the purchase and a mortgage, plus one will (if desired). The price includes legal fees, disbursements and a TitlePLUS policy. It is estimated that the lawyer receives fees from the transaction in the range of $400 - $500.

There is no reason to believe that fees for conveyancing will fall significantly if added service providers are allowed into the market. The downward pressure of competition is already being imposed by the largest players in the market, being the lenders and the builders.

Real estate lawyers have responded prudently to the challenges of a changing marketplace: they have automated, streamlined their business practices, and added more services for clients. They have adopted title insurance as routine for many types of residential transactions. Although only one of several providers in the market, TitlePLUS currently has approximately 1250 automated subscribers. In addition, TitlePLUS sold policies to 400 lawyers on a "phone-in" basis since March, 1999.

There were 2000 law firms with Teraview subscriptions at the end of 1999. Lawyers in Middlesex participated in the beta test for electronic registration throughout 1999 and it will become mandatory in March, 2000.

Real estate lawyers may now offer their clients access to deferred closing cost and extended home warranty programs, thus reflecting a movement towards one-stop shopping for the consumer.

In summary, these are all indications that the real estate bar has recognized the need to respond to consumer demand for better prices and more efficiency.

Conclusions
Based on all of the above, there is no reason to believe that (a) consumers would be as well protected by paralegals conducting real estate transactions; (b) service levels would be better; or (c) prices would be lower. Consequently, there is no reason to open this area to practice by paralegals, other than as a law clerk under the direct supervision of a lawyer in a law firm.

It must also be remembered that the vast majority of real estate transactions have two arm’s length parties involved. Where one side is less ably represented than the other side, it results in endless problems for the "innocent" party. This currently happens, for example, where one party will decide to represent him or herself. In other words, whether or not to retain legal representation in a transaction is not just a personal decision; it affects the other party. This is different from a number of areas in which paralegals now operate in Ontario (such as traffic offences, immigration matters and incorporations) where the impact of the decision regarding representation is not felt directly by another Ontario citizen.