The most widely read magazine for Canadian lawyers
Issue link: https://digital.canadianlawyermag.com/i/50803
REAL ESTATE Real estate fraud a moving target W hile Ontario real estate lawyers made ready to get in line with a new set of Rules of Professional Practice aimed at cracking down on fraud, a prominent To- ronto practitioner says they are battling a moving target that is likely steered by organized crime. "I think the police, investigators, real estate counsel, and the law society are inundated with fraud investigations," says Bob Aaron, a Law Society of Upper Canada bencher and member of the group that shaped the rules that took hold March 31. "The statistics are — and I'm told by the Toronto Police Services — that real estate fraud is not diminishing. And if you look at the U.S. figures, they bear that out. The numbers are horrendous." Included in the changes is rule 2.04.1, known as the two- lawyer rule, which restricts a single lawyer from acting for both the transferor and transferee in real estate transaction. There are exceptions to the rule, such as sales in which the transferor and transferee are related (as defined by the Income Tax Act) and in some instances for lawyers practising law in remote areas of the province. The two lawyers can practise in the same firm, but gen- eral conflict of interest rules apply. Changes to rule 5.01, meanwhile, mean the buck stops with lawyers when it comes to signing documents with the e-reg sys- tem. The rule states lawyers "assume complete professional re- sponsibility for his or her practice of law" and must oversee non- lawyers to whom they assign tasks. The rule prevents lawyers from letting others use their diskette to access the e-reg system. The law society says the changes acknowledge the govern- ment's view that "lawyers play an important role in real estate New rules in Ontario aim to crack down on criminals, but fraudsters appear to be getting bolder. BY ROBE R T TODD matters and are uniquely positioned to help protect homebuyers and the integrity of Ontario's land registry system." Lawyers also had until March 31 to apply and register an ac- count. Those who didn't comply were left with only searching ca- pabilities, all part of a move by the government to restrict access to the e-reg system, along with new registration requirements for transfers of title and powers of attorney. Aaron says the new rules will greatly affect lawyers who "farm out" real estate work to freelancers. "So lawyers who basically manage a real estate practice but have somebody in the back end do all the work, they've got a serious problem," he says. "It's going to impact lawyers who don't either have their own disk or who don't do their own work and who farm it out." The change to rule 5.01 will also be acutely felt by lawyers who have "a volume practice." Such lawyers would previously have had their staff sign electronic documents, but as of March 31 they began having to walk to their staff's computer, manually insert their diskette, type in their password, and wait for it to register on the system. "They're going to be very busy signing documents electronically where they haven't been before," says Aaron. Mark McMackin, of Ricketts Harris LLP in Toronto, says his firm kept on top of the new guidelines. "We felt there would be a flood of people coming in at the end of the month, so [managing part- ner Robert Preston] was in there as soon as they'd allow him," says McMackin. He says his firm has traditionally required all clients to bring in official documentation to ensure transactions are legiti- mate. "You have to consider your clients to be potential enemies, so you have to make sure that everything you do, you've covered www. C ANADIAN mag.com M AY 2008 23