WESTERN CANADIAN LAW SOCIETIES CONVEYANCING PROTOCOL: THE INSURER'S PERSPECTIVE

Transcription

1 ' WESTERN CANADIAN LAW SOCIETIES CONVEYANCING PROTOCOL: THE INSURER'S PERSPECTIVE Coverage All Saskatchewan lawyers carry compulsory errors and omissions insurance with Canadian Lawyers' Insurance Association. The policy is administered through Saskatchewan Lawyers' Insurance Association. The policy provides coverage of $1,000, per occurrence subject to a retained risk of $7, for an error or an omission on a real estate file. This policy continues to remain in full force and effect subject to an exception for the Western Law Societies Conveyancing Protocol. The insurer was approached by the Law Societies of Western Canada and asked to support changes to practice which would streamline conveyancing. These changes allow lawyers to provide better service to lending institutions, vendors and purchasers. Unfortunately, the practice also creates a small risk of personal liability to a lawyer because of an intervening registered interest or because of a surveyor zoning problem. Although the potential for an error occurring is low, it would be unfair to ask any individual lawyer to assume that risk and the loss of $7, The insurerhas agreed that any risk ofloss caused by a protocol closing will be pooled, or shared among all insureds. The insurer is therefore waiving the deductible for any losses directly caused by a lawyer following the Western Conveyancing Protocol until the policy is amended on July 1, The deductible will be waived for the following: \ } - 23-

2 ~ 1. Any loss incurred by a financial institution arising from intervening interests registered between the day before closing and the day of registration of the transfer and/or mortgage. 2. Any loss incurred by a financial institution arising from errors or omissions relating to unknown zoning problems or relating to unknown encroachments concerning the boundary of the property or the location of structures or improvements on the residential property, or adjoining properties, providing the lawyer was unaware of the problem and has followed the protocol. 3. Any loss incurred by a purchaser arising from intervening interests registered between the day before closing and the date of registration of the transfer. Claims Lawyers are asking clients to accept new practise standards which may occasionally result in claims. If the protocol is to succeed clients must be assured that claims will be handled expeditiously. In the event of a loss arising as a result of compliance with the protocol, the insured is required to report immediately to Saskatchewan Lawyers' Insurance Association and cooperate with rectification or resolution. The required reporting form can be found in your Insurance and Loss Prevention binder. In order to obtain the benefits of the waived deductible, the insured must demonstrate the following: The loan is for an existing residential property, as defined in the Western Law Societies Conveyancing Protocol. The insured has complied with the minimum standards established by the protocol prior to issuance of the Solicitors Opinion. d ~ - 24-

3 i 3. The insured has certified the checklist priorto issuing a certificate. The insurer will investigate the claim and attempt to rectify any error. In the event that an actual loss is suffered, the insurer will provide a complete indemnity to the lawyer, subject to all other terms and conditions of the policy. Loss Prevention Saskatchewan Lawyers' Insurance Association has been in existence since July 1, Since. I that time, 30% of our claims have consistently been caused by real estate errors. These claims have resulted in paid losses to date of $4,539, Simple mental errors or omissions in the registration of documents cause most of the losses. Although there is a small risk in following the protocol, we are hopeful that this risk will be more than off set by the standardization ofpractice and the adherence to a checklist. However, the checklist and the protocol are no substitute for diligence. Lawyers must continually be watchful for potential issues which may affect clients. For example, if there is an existing surveyor's certificate, it must be reviewed with the client. Risk to the Insurer Dion Durrell, who are actuaries to Canadian Lawyers Insurance Association, conducted a study ---f.j q in 1999 to attempt to determine risk. Dion Durrell reviewed claims from British Columbia where the practice ofreleasing funds on the day of registration has occurred for many years. Their insurer advises us that this practice results in few claims

4 In addition, it was determined that financial institutions which do not require survey certificates had a low loss rate. Finally, Insurers and practitioners in Manitoba, Alberta and Saskatchewan provided both statistical and anecdotal evidence to Dion Durrell for evaluation. It is not anticipated that the protocol will cause significant loss or cause a significant increase in the insurance premium. The introduction of the new land registry system will also soon overtake the protocol practise. January 31, 2001 Thomas J. Schonhoffer

5 THE WESTERN LAW SOCIETIES CONVEYANCING PROTOCOL BUSINESS OVERVIEW OF THE PROJECT Who: Law Society of British Columbia Law Society of Alberta Law Society ofsaskatchewan Law Society ofmanitoba What: a similarapproach to closing residential real estate transactions in western Canada closing concurrent with submitting documents for registration closing without surveyor certificates and zoning memorandums simplified and standardized reporting to lenders applicable to cash purchases, purchases with mortgage financing and all mortgage refinancing of residential properties ---cl Why: financial institutions want funds advanced on a timely basis purchasers do not want to interim finance if it can be avoided vendors want to be paid on closing Land Titles registration systems presently run with a delay surveyor certificates and zoning memorandums seen by consumers as costly and time consuming impediments to efficient closings lawyers must work together in responding to competitive change In the conveyancing marketplace. When: February 15,2001 U. Where: across Western Canada -27-

6 How: financial institutions have been made aware of the project at upper levels CMHC has been made aware of the project regionally pilot projects have been run or are in the works the project is designed as a tool for lawyers to use to compete III the marketplace you can promote instant closings on cash transactions you can use with Credit Unions and independent commercial lenders you can educate and encourage local management of major financial institutions (see sample letter attached you can promote prompt payment of commissions to realtors Problems: some lenders will still require a survey there may be no explicit reference to the Protocol in a lender's instructions lenders may still require conformity to their reporting processes -J d -28-

7 }, }. },. PRECEDENTS Purchaser's Acknowledgement of Instructions Solicitor's Opinion Letter - Lender Solicitor's Opinion Letter - Purchaser Revised Trust Condition Letter Sample Letter to Mortgage Lender ~J,J

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9 PURCHASER'S ACKNOWLEDGEMENT OF INSTRUCTIONS Date: Re: (the "Property" Purchaser: 1. A Real Property Report is a survey of a property by a registered Land Surveyor whereby the surveyor certifies the following information: (a (b (c (d (e the property limits and measurements; the location of any buildings on the property and particulars of any encroachments of those buildings on adjoining lands; encroachments of any buildings from adjoining lands; particulars of the sideyards; location of all registered Easements which affect the property J Y 2. An older report shows the physical characteristics of the Property as at the date of the Report, and it will not show any new construction on the Property or on the adjoining lands. Any such new construction may be an encroachment or a contravention of municipal building requirements which could adversely affect the value of the Property or result in expense should you be required to remove an encroachment or comply with municipal building or zoning requirements. In addition, an older Surveyor's Certificate may not show the location of registered Easements which affect the Property. Saskatchewan Land Surveyors claim copyright protection with respect to Real Property Reports. A building information abstract/siting certificate/zoning memorandum/compliance certificate, may be available through the municipality. These documents will confirm the zoning applicable to the Property. They may identify whether required building and

10 - 2 - electrical permits were. obtained for work such as basement renovation or garage construction, and identify any non-compliance with building or fire codes. They may identify whether additions conform with local zoning bylaws. A Surveyor's Certificate/Real Property Report must be presented to obtain certain of these documents. 3. Goods and Services Tax is payable with respect to our fee, but not with respect to certain exempt disbursements we incur as agent on your behalf. We request that you confirm our appointment as your agent in this regard. It is recommended that you obtain a current Real Property Report and applicable building information abstract/siting certificate/zoning memorandum/compliance certificate for the Property. I/We have read and understand the foregoing and instruct our solicitors as follows: 1. To obtain on our behalf a new Real Property Report. I/We will rely on the existing Surveyor's Certificate and do not wish to obtain a Real Property Report. I/We do not wish to obtain a Real Property Report. 2. To obtain on my/our behalf the applicable building information abstracvsiting certificate/zoning memorandum/compliance certificate. I/We do not wish to obtain a building information abstracvsiting certificate/zoning memorandum/compliance certificate. 3. Further, I/we confirm the appointment of our solicitor as agent for the purpose of incurring disbursements necessary to this acquisition and/or mortgaging of the Property. Dated: _

11 Western Law Societies' Conveyancing Protocol Solicitor's Opinion To: Re: (Name of Lender Mortgage Loan Number: Mortgage Amount: $ Purchase Price: $ Date: The Parties: Mortgagor(s: Name and Address of Mortgagors Guarantor(s: Name and Address of Guarantors The Property: Civic Address: Legal Address: I have complied with the Western Law Societies' Conveyancing Protocol (Saskatchewan in the conduct of this transaction and have acted in accordance with your instructions with respect to the real property mortgage described above. Subject to any qualifications noted below, which have been accepted by you, it is my opinion that the mortgage can now be funded and the funds disbursed. Qualifications: Issuing Lawyer: Barrister and Solicitor Member of the Law Society ofsaskatchewan

12 Western Law Societies' C9nveyancing Protocol Solicitor's Opinion To: (Name of Purchaser Date: Re: The Property Civil Address: Legal Address: I have complied with the Western Law Societies' Conveyancing Protocol (Saskatchewan in the conduct of this transaction and have acted in accordance with your instructions with respect to the purchase of the real property described above. Subject to the instructions provided by you, and subject to any qualifications noted below, which have been accepted by you, it is my opinion that the purchase transaction can now be completed and the funds can be released to the Vendor. Qualifications: Issuing Lawyer: Barrister and Solicitor Member of the Law Society of Saskatchewan --1. : Lj }

13 Revised Trust Condition format for use when using a Solicitor's Opinion under the Western Law Societies Conveyancing Protocol (Date Dear Sirs: RE: LAW SOCIETY UNIFORM TRUST LETTER FORMAT -WESTERN LAW SOCIETIES CONVEYANCING PROTOCOL VENDOR: PURCHASER: PROPERTY: POSSESSION DATE: OUR FILE: We are the solicitors for the Vendor in the above-noted transaction and we enclose the following: 1. Transfer ofland; 2. Statement ofadjustments; 3. Duplicate Certificate oftitle No.; 4. Surveyor's CertificatelReal Property Report; 5. GST Exemption Certificate ofvendor; 6. Partial Discharge ofmortgage No. This will confirm your advice that you are closing the transaction utilizing the Solicitor's Opinion under the Western Law Societies Conveyancing Protocol. Accordingly, the enclosed documents are forwarded to you on the trust conditions set out below in accordance with the Law Society Uniform Trust Letter format for closings utilizing the Solicitor's Opinion under the Western Law Societies Conveyancing Protocol. 1. On or before the possession or adjustment date (whichever first occurs, which earlier date is hereinafter referred to as the "possession date", you will forward to this office the balance due to close as is indicated in our statement of adjustments together with your certification that you have issued the Solicitor's Opinion under the Western Law Societies Conveyancing Protocol and that, subject to our complying with the following undertakings, the balance due to close is immediately releasable to the Vendor; -----i. ~ W 2. As soon as is reasonably possible and in any event no later than two (2 business days after the possession date, you tender the Transfer of Land and mortgage documentation to the Land Titles Office for registration; 3. Within a reasonable period oftime following the registration of the within Transfer, you will notify the appropriate municipal authority ofthe change ofownership;

14 4. If the Transfer of Land and/or mortgage documents are rejected by the Land Titles Office, you will take all reasonable steps to: (a (b correct the documentation or cause it to be corrected if you are able to do so and re-submit the same for registration; forward any documents supplied by the Vendor to our office for remedy, if necessary, and we undertake to correct sucl1 deficiency if we are able to do so, and re-deliver the same to your office for you to re-submit for registration.. If you are unwilling or unable to accept all of the aforementioned conditions of trust, then the enclosed documents are to be returned to this office forthwith and unused unless an alternative is firstly arrived at in writing with the writer. We undertake as follows: 1. To return the balance to due close to you in the event either of the following circumstances occur: (a on or before the possession date, we become aware of any circumstance relating to the Vendor which would adversely affect the issuance of title in your client's name, subject only to the following encumbrances: (i (ii (iii (iv any encumbrance registered by or against your client; Easement No. Caveat No. Mortgage No. (b your client does not receive vacant possession of the subject property on the possession date; 2. To: (a payout and cause to be discharged from title the following encumbrances: (i (ii Caveat No. Mortgage No. (b (c pay the taxes necessary to conform with the statement ofadjustments; ensure that all payments are made on the mortgage being assumed by your clients in order to conform with the statement ofadjustments (if applicable. In order for us to authorize your client's possession of the property, will require your confirmation that the trust conditions and undertakings in this letter are acceptable to you. If U

15 either the trust conditions or the undertakings are not acceptable to you, please contact the writer immediately. Yours truly, Per: Enclosures (Date Dear Sirs: Suggested format ofletter from the solicitor for purchaser enclosing the balance due to close RE: LAW SOCIETY UNIFORM TRUST LETTER FORMAT -WESTERN LAW SOCIETIES CONVEYANCING PROTOCOL VENDOR: PURCHASER: PROPERTY: POSSESSION DATE: OUR FILE: We are the solicitors for the Purchaser in the above-captioned transaction. This will acknowledge receipt ofyour letter dated the _ day of, 20_, setting out the trust conditions and undertakings for the above-captioned purchase and sale utilizing the Solicitor's Opinion under the Western Law Societies Conveyancing Protocol (the "Trust Letter". ---J ~ We are enclosing our trust cheque in the amount of $ representing the balance due to close as referenced in your Statement of Adjustments. We confirm that the trust conditions and undertakings referenced in the Trust Letter are acceptable to our office. We hereby certify to you that we have issued the Solicitor's Opinion under the Western L~.~ocieties Conveyancing Protocol for this transaction and acknowledged that subject to~rcomplying with the undertakings referenced in the Trust Letter, the balance due to close is immediately releasable to the Vendor. Please arrange for the release of keys in accordance with the Offer to Purchase. Plealle also :verify 'NftCft your Glient has recei ed :vaeant-possessiurrofthe-subject-property-so-that we might disb\u:se-thth3alftflee-tlue te close in-aeeorclanee-with-instrnctiuns1:hat-we-have1"eceived.from the VeRde!. Yours truly, Per: Enclosures

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17 [SAMPLE LETTER TO MORTGAGE LENDER] Dear Sirs: Re: Mortgage Loan No. Property: Borrower: Guarantor: I am acting for you.in connection with the preparation and registration of the above mortgage. I propose to complete this mortgage transaction in accordance with the Western Law Societies Conveyancing Protocol (the "Protocol". This letter is to explain to you the nature and purpose of the Protocol, and how the mortgage transaction will be simplified and expedited under the Protocol procedure. The Protocol is a joint initiative of the Law Societies of Manitoba, Saskatchewan, Alberta and British Columbia. It introduces a new conveyancing practice, which will streamline the mortgage process for lenders by: 1. allowing for the release of mortgage proceeds and other purchase funds on closing (rather than after registrations are completed; and 2. enabling lawyers to satisfy the unique security requirements of mortgage lenders without obtaining a current Real Property Report/Surveyor's Certificate and zoning memorandum. ---j....j b. The Protocol prescribes enhanced standards of conveyancing practice, which will result in better service for you and your borrowers. I will be undertaking all the usual investigations on your behalf (other than obtaining a new Real Property Report/Surveyor's Certificate and zoning memorandum, plus a number ofnew precautionary steps to ensure that your interests are protected. On the closing.j -1-

18 date - and provided that I have been able to meet allthe conditions of the Protocol - I will issue to you the short form of Solicitor's Opinion prescribed under the Protocol. A form of that Solicitor's Opinion is attached. As you see, the Solicitor's Opinion will simply confirm that I have complied with the Protocol, that I have acted in accordance with your instructions, and that it is my opinion that the mortgage can then be funded and the funds disbursed. In the event that I find any problems with the mortgage (for example, if there are encumbrances on title which may adversely affect your security and which cannot be postponed or discharged, or a known survey problem exists, I will bring those issues to your attention and obtain your further instructions, before closing. Ifyou agree to accept the defect, I will confirm those instructions by way of a qualification in the Solicitor's Opinion. If you require me to provide you with any other reporting documents when the mortgage proceeds are requisitioned, I will do so. Having said that, I encourage you to dispense with requiring delivery of any additional reports or copies of documents until the mortgage transaction is completed. At that time, I will be able to provide you with a single package, confirming registration particulars and all other details about your mortgage. When I issue to you the Protocol Solicitor's Opinion, it means that I have sufficient control over all remaining steps in the transaction that I will ultimately be able to satisfy your requirements. When you receive the Solicitor's Opinion, you can safely advance mortgage funds to me (or trust me to then use the funds, if they have already been provided to me, and rely on me to meet those requirements. To summarize, there are three distinct benefits for you under the Protocol, namely: 1. You will not have to review a lengthy solicitor's opinion or report before funding. I will still do all the legal work necessary to ensure that your mortgage will meet your requirements, but the conclusion of those steps and investigations will be neatly summarized in the short form of Solicitor's Opinion j.--> d J -->

19 2. 3. In Manitoba, Saskatchewan and Alberta, lawyers have traditionally postponed the release of mortgage funds until registration ofthe mortgage has been completed, often causing a delay of several days. That delay is now eliminated, as I can issue the Solicitor's Opinion and disburse the mortgage proceeds on the closing date. You no longer must insist that a current Real Property Report/Surveyor's Certificate and zoning memorandum be obtained. The Protocol outlines various investigations I must make to identify any known "Survey Defects" (that is, any encroachment over a boundary or into a required side yard or setback which may have an adverse effect on the mortgage. If a Survey Defect is identified, I will advise you of it, and of the arrangements made with your borrower or other parties to remedy or compensate for it. Before issuing the Solicitor's Opinion, I will confirm that you are prepared to accept such Survey Defect. In most cases, though, I will not have to obtain a new Real Property Report/Surveyor's Certificate and zoning memorandum in order to satisfy your requirements. Upon complying with the Protocol, I can reasonably hold the opinion that a current Real Property/Surveyor's Certificate and zoning memorandum need not be obtained because they are not necessary for your purposes, and that there are no Survey Defects which will have an adverse effect on your security, other than those you have accepted. When retaining a lawyer, you have always had the comfort of knowing that professional liability J --J,~ ~:j insurance stands behind the lawyer's services. The Law Societies of Manitoba, Saskatchewan, Alberta and British Columbia each maintain insurance programs and claims funds to provide professional liability insurance for lawyers. All lawyers in private practice carry compulsory coverage of $1,000, per claim through their Law Society's insurance program. My professional liability insurance stands behind the Solicitor's Opinion I will give you under the Protocol. As always, I will be bound to act in accordance with your instructions and to see that you obtain the mortgage security you require. Now, under the Protocol, there are the following additional matters on which you will be relying on my professional opinion: -3-

20 1. that the mortgage will ultimately be registered, subject to no registrations other than those you have accepted; and. 2. that there are no Survey Defects which will adversely affect your security, other than those of which you know and have accepted. In the unlikely event that I am wrong on either of those counts, my professional liability insurance will be available to ensure that you recover any actual loss suffered as a result of my error or omission. My Law Society's insurance program has approved the procedures prescribed by the Protocol. If you suffer actual loss because either of those opinions is incorrect, my professional liability insurer will attend to the prompt repair or resolution of your claim, as appropriate. I am enclosing a brochure which describes the Western Law Societies Conveyancing Project in greater detail. If you have any questions or concerns about the Protocol or my proposal to adhere to the Protocol procedures in this mortgage transaction, please contact me. Ifyou approve of my proposal to conduct this transaction in accordance with the Protocol, please confirm that to me by whatever means you wish. For you convenience, your approval may be indicated by signing and returning to me a copy of this letter. Yours truly, --J u ~- -4-