Lawyers Business & Property Network Association
A Presentation for Lawyers
prepared by Nick Weiser, Fulton & Company
1. INTRODUCTION
Traditionally, when we talked about real estate and business transactions lawyers did not provide legal services to their clients until sometime after a binding contract of purchase and sale had come into being. Generally speaking, lawyers were retained simply to "paper" a transaction which had already been negotiated, reduced to writing, and signed by the parties to the agreement without the benefit of a lawyer's professional advice.
The notion that lawyers should become involved in their client's legal matters sooner rather than later has begun to evolve based on the concept of giving the client the benefit of the lawyer's legal acumen early on in the transaction which will then bring a higher level of professionalism to the transaction and which will benefit the client and help to ensure that the transaction proceeds smoothly.
In Scotland this concept took practical form in Edinburgh and Aberdeen in 1970 when a group of Solicitors came together and opened what was referred to as a "Property Centre". The Property Centre was an office open to members of the public where Solicitors could showcase their client's properties for sale. The Solicitor's Property Centres were staffed by employees paid for by the member Solicitors.
Mr Bruce Ritchie of the Law Society of Scotland advised that the concept of Solicitor Property Sales was
"the single most successful initiative undertaken by Solicitors since
the Second World War. It has enjoyed fantastic success".
Of the approximately 7,500 Solicitors in Scotland who are in private practice nearly 75% are involved in Solicitor Property Sales. There are now twelve Solicitor Property Centres in Scotland and last year (2004) 94% of all real estate transactions in Scotland were conducted through Solicitor Property Centres and under the direct supervision of Solicitors.
In 1999 the Scottish Solicitors expanded Solicitor Property Sales into England. Under this new initiative there are now ten Solicitor Property Centres located mainly in the northern part of England.
In British Columbia, following the Scottish Solicitors model, Canadian Solicitors took the initiative and on July 26, 2001, the "Lawyers Business & Property Network Association" ("the Network") (also known as "the LBPN"), was incorporated. The Society is a non-profit Society whose membership is open to Barristers and Solicitors of Canada. The Society has twelve stated purposes including, inter alia, the following:
"(b) To do all things necessary to promote interest in the marketing of
all manner of legal services and included, but not limited to, promoting
lawyer's ability to market the client's business interest, real property,
and other assets of every nature and type with the public."
The Network is being used to adapt the Scottish Solicitors Property Sales model to British Columbia conditions and to promote Solicitor Property Sales in British Columbia.
In that regard the Network has done the following:
(a) Create a website which provides general information to members of the society and the
public and encourages and promotes the acceptance by the general public of the
concept of Solicitor Property Sales;
(b) Establish, in conjunction with the Law Society, a package of standardized
documentation which has been vetted and approved by the Law Society Ethics
Committee covering the following:
(i) Retainer agreements for buyers and sellers;
(ii) Contracts of Purchase and Sale for commercial, industrial and
residential property and other assets;
(iii) Miscellaneous forms pertaining to such items as Removal of
Conditions Precedent and the like.
The membership fee is $250.00 per year and provides the member with access to the services offered by the Network. The Network does not charge a fee per transaction to its' members.
2. REGULATORY ISSUES
The Real Estate Services Act (formerly known as the Real Estate Act) requires the licensing of all people who sell real estate subject to a limited number of exemptions. The exemption for lawyers is found at paragraph 3 (f) which states:
"....the following are exempt from the requirement to be licensed under this part;
(f) a practicing lawyer as defined in Section 1 of the Legal Profession Act, in
respect of real estate services provided in the course of the persons practice."
Following a complaint made by the BC Real Estate Association, to the office of the Superintendent of Real Estate, the Superintendent questioned whether lawyers can rely on this exemption for Solicitor Property Sales without being licensed under the Real Estate Services Act. The BC Real Estate Association indicated that it would sue any lawyer conducting Solicitor Property Sales.
The Law Society intervened on behalf of its' members and the Network and provided an opinion that:
(a) The Real Esate Services Act and the Legal Profession Act define exclusive fields of
regulatory authority. In other words under the Real Esate Services Act the
Superintendent of Real Esate has exclusive authority to regulate non-lawyers in real
estate sales and under the Legal Profession Act the Law Society has exclusive
authority to regulate lawyers in real estate sales;
(b) The Law Society imposes higher standards of education, conduct and accountability
on lawyers than are imposed on real estate agents and sales persons;
(c) The Law Society maintains insurance in special fund programs that are better than the
security provided to clients of real estate agents;
(d) Requiring lawyers to be licensed under the Real Estate Act would be redundant and
would not increase public protection.
Further, the Law Society advised the BC Real Estate Association that any action commenced against a member of the legal profession by the BC Real Estate Association would be defended by the Law Society.
As a result the Real Estate Association decided that rather than seeking a court determination of the scope of the exemption for lawyers, the Real Estate Association would seek a legislative amendment that would remove the exemption for lawyers from the Real Estate Services Act thereby making it an offence for lawyers to engage in Solicitor Property Sales in British Columbia. In January 2004 written submissions from the BC Real Estate Association were presented to the Minister of Finance. Incidentally, one of the arguments advanced by the BC Real Estate Association to the Minister of Finance was that, in essence, lawyers were not qualified to give advice to members of the general public with regard to contracts of purchase and sale dealing with real estate. In response, the Law Society and members of the Network made written counter-submissions and also met with the Minister of Finance. The resulting compromise was that no legislative changes would be made to the Real Estate Services Act and lawyers would continue to be exempt from licensing requirements under that act, but amendments were made to the lawyer's professional conduct handbook. Rules 10 to 12 and rule 22 now specifically permit a lawyer to employ an assistant in the marketing of real estate property with certain limitations. That assistant may be referred to as a "real estate marketing assistant" and the assistant may place or remove signs relating to the sale of a property, attend to a property in order to unlock it and let members of the public, real estate licensees or other lawyers enter, and provide members of the public with pre-printed information about the property prepared or approved by the lawyer, but, the assistant may not conduct an open house.
3. INSURANCE
Susan I. Forbes, Director of Insurance, by letter dated April 8, 2002 has confirmed the following:
(a) "Services" consist of acting for Buyers and Sellers in the purchase and sale of
property and/or goods (the "assets") pursuant to the retainer agreements ..."
(b) "Professional services" are defined in the policy to include the practice of law as
defined in the Legal Profession Act. As the Law Society considers the services to
be the practice of law, the services fall within the definition of "professional services".
As a result the policy will prima-facie, provide coverage to each member of the network
for any cliams that may arise out of any "error" by that lawyer in providing the services.
Margrett George, program administrator/claims counsel for the Lawyer's Insurance Fund has indicated the following:
(a) Lawyers engaged in Solicitor Property Sales are insured. There is a link to a website for
lawyers involved in property sales and in particular, information about insurance
coverage for the practice at www.lawsociety.bc.ca. Look under "new initiatives".
(b) Lawyers thinking about engaging in Solicitor Property Sales should contact Margrett
George at 604-443-5761 if there are any questions. Lawyers are reminded that as
lawyers they cannot appraise or value properties, and property maintenance or
repairs would fall outside the scope of coverage.
(c) Any lawyers engaged in Solicitor Property Sales (as in any practice area for that
matter) should practice reasonable and prudent risk management.
4. PRACTICAL APPLICATION
Members of the association in conjunction with the ethics committee of the Law Society have prepared retainer agreements for Buyers and Sellers, standard forms of contracts of purchase and sale for commerical, industrial and residential property and other assets and miscellaneous forms pertaining to such items as "removal of conditions precedent" and the like.
The client who wishes to Buy or Sell property enters into a retainer agreement with the Solicitor. Incidentally, the concept of a retainer agreement has helped to explain Solicitor Property Sales to Barristers.
The retainer agreement that members of the Association use is a standardized retainer agreement that has been approved, as indicated, by the Law Society of British Columbia and our insurer.
It should also be noted that each client to the transaction must be represented by separate lawyers. The so called "dual agency" arrangement which can be seen as the practice in the real estate industry is not permitted under the Lawyers Business & Property Network.
The amount that the lawyer charges under the retainer agreement as his or her fee is dependant upon negotiations with the client, the involvement that the lawyer will have with regard to helping the client market the property and the like. The retainer agreement may or may not, depending on negotiations, include disbursements.
Retainer agreement fees generally range in the order of from 4 to 8 per cent.
As an example, when a lawyer meets with a prospective client who wishes to retain the lawyer, before signing the retainer agreement the lawyer and the client should discuss such things as:
(a) What marketing will be undertaken. The client may decide to have the property
described only on the Lawyers Business & Property Network website. Alternatively,
the client may ask the lawyer to place an ad in a newspaper, prepare a glossy brochure
and put a sign on the property or a combination thereof. Lawyers should also explore
other more creative methods of marketing. Other clients may seek complete discretion
and confidentiality and simply ask the lawyer to discreetly mention that the asset is for
sale to a select few individuals who may be potential purchasers;
(b) Once an interested purchaser has been located the lawyer assists the client in
negotiating the terms of the transaction with the prospective purchaser's Solicitor.
If suitable terms can be arrived at the lawyer will then, in conjunction with the
purchaser's Solicitor, prepare sale documentation;
(c) Upon completion of the transaction the lawyer renders an account for the amount set
out and agreed upon in the contingent fee agreement and the account is paid by way
of transfer from trust through monies received upon completion of the transaction;
(d) Retaining the services of an appraiser to value the property.
5. ADVANTAGES & DISADVANTAGES
Advantages:
(a) Lawyer involvement from inception of the transaction resulting in enhanced preliminary
investigative and due diligence searches;
(b) Increased lawyer/client contact;
(c) One stop service for clients:
(d) Strict confidentiality through Solicitor/client privilege;
(e) Proper handling of deposits and sale proceeds through the Solicitor's trust accounts;
(f) Strict enforcement of the requirement that all parties be represented by independent
lawyers ie: no dual agency;
(g) Solicitor property sales give the lawyer the opportunity to provide accessbile
and affordable legal representation to the public.
Disadvantages:
(a) Real estate agents and real estate sales people upset about lawyers moving into
their "territory".
6. CONCLUSION
It is not the intention of members of the Lawyers Business & Property Network to become "realtors", "auctioneers" or "used car dealers". Members of the Network propose to provide enhanced legal services to their clients by getting involved in transactions from their inception. Using the Scottish Solicitors model with some modification to take into account particular circumstances unique to British Columbia as our precedent, members of the Association are moving forward with this exciting new initiative.
Barristers and Solicitors often have an ongoing longstanding relationship with their various clients. The lawyer is often in the best position to give his or her client proper legal advice and to guide the client through the process of buying or selling property, a business or other assets at all times, ensuring that the client's legal interests are protected.
Jeff Jones of Jones Seaborn and Company of Port McNeil, Port Hardy and Alert Bay has made the following comment:
"If lawyers hesitate to take up this opportunity, it may be founded on a misperception that this is similar to the realtor model, when in fact it is very different. If anything is consistent with our historical legal services, then this is. It's involving title, real estate, title searches and negotiating - all of which we do on a regular basis. If there is anything that lawyers can do, this is absolutely on all fours."
2013
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