Western Law Societies Conveyancing Protocol (Alberta)

"Top Ten" Questions

Question:

1.Part A of the Protocol states that it applies to single family residential transactions and not to multi-family dwellings or commercial transactions.  What about:

(a) undeveloped residential lots;

(b) undeveloped commercial property;

(c) unimproved agricultural lands;

(d) leasehold interests where a leasehold title exists.

Answer:

The Protocol applies to the sale and purchase of undeveloped residential lots. The Protocol does not apply to commercial, agricultural and leasehold transactions, construction loans or completion mortgages at the present time.

Question:

2. Where do Real Property Reports fit into the “scheme” of things, for example:

(a) If the client either chooses to obtain a Real Property Report or is to receive one pursuant to the Agreement, should the Lender’s Lawyer wait for the Real Property Report and Compliance before providing their Solicitor’s Opinion to the Lender under the Protocol?

(b) If the Real Property Report arrives after the transaction has closed and a survey defect is disclosed, is the defect considered “unknown” for the purposes of liability insurance coverage?

(c) Is the Lender’s Lawyer is justified in refusing to proceed under the Protocol until the Real Property Report and Compliance have been received?

(d)      What if there is a known survey defect?  Can the Protocol still be followed?

Answer:

Section 4 in the Protocol under Duties of the Buyer’s Lawyer states that a Real Property Report and Certificate of Compliance are not required for the lender unless there is a known defect.  Therefore the discussion of questions (a), (b) and (c) below applies in situations where no defect is disclosed during the course of the Lawyer’s initial investigations under the Protocol:

(a) The Lender’s lawyer, if he or she also acts for the Buyer, must wait for the Real Property Report and compliance if so instructed by either the Buyer or the Lender.  Under the Protocol a lawyer is still obligated to follow the instructions of his or her client.  If the Lender’s Lawyer does not also act for the Buyer, the Lender’s lawyer need only follow the instructions of the Lender.  As a matter of courtesy, if the Buyer’s lawyer informs the Lender’s lawyer that the Buyer would prefer not to have the funds advanced on the closing date under the Protocol, the Lender’s lawyer should pass that request on to the Lender and confirm the Lender’s instructions.

(b) If the Real Property Report arrives after the transaction has closed under the Protocol and a survey defect is identified, that defect would be considered as unknown for the purposes of liability insurance covering losses to the Lender.  Unless you can immediately remedy the problem, report to the Alberta Lawyer’s Insurance Association right away.

(c) Subject to the comments in 2(a) above, the Lender’s Lawyer, whether or not he or she acts for the buyer as well, is not justified in refusing to obtain the advance of loan proceeds until the Real Property Report and Compliance have been received.

(d) If there is a significant survey defect that is disclosed before the closing date, this must be brought to the attention of the Lender and instructions sought on what is acceptable to the Lender as is the current practice.

Question:
 
3. Why does our Professional Liability Insurance cover losses suffered by the Lender arising from a survey defect but not those losses suffered by a Buyer.

Answer:

The change in practice standards under the Protocol allows the Lender’s Lawyer to provide the  Lender with the opinion that a Real Property Report with a Certificate of Compliance is not necessary (unless there is a known survey defect before the closing).  The insurer has agreed to accept liability for losses suffered by the Lender pursuant to the Solicitor’s Opinion that the Lender does not need a Real Property Report with the Certificate of Compliance.  The insurers consider the Lender claims pursuant to the Solicitor’s Opinion to be very low risk.  The Buyer’s Lawyer must continue to protect the Buyer under the contract and look to the Buyer’s
contractual remedies in the event of a loss.  If a Lawyer is negligent in fulfilling that duty, a liability claim by the Buyer against the Lawyer would be handled in the normal course.

Question:

4.   What should a Lender’s Lawyer do if the Protocol Solicitor’s Opinion does not correspond with the requirements under the Lender’s instructions and the Lender decides not to accept it.

Answer:

Almost without exception all lenders contacted when the Protocol was in the planning stages welcomed the idea of less detail in the opinions that are provided to them in connection with security placed on their behalf.  They simply want to know whether or not to advance the funds and that they can rely on the opinion given to them in making that decision.  They also have an interest in seeing their customers satisfied that their loan has been handled as simply and efficiently as possible.

Because the Protocol serves those interests, we expect that the Lenders will welcome the procedure.  The materials contain a sample letter to the Lenders, which should also be of considerable help in introducing the Lenders to the concept and making them comfortable with it.

The Lender may accept the protocol closing procedures but still require their own form of reporting requirements.  If a Lender is not prepared to proceed under the Protocol the Lawyer is encouraged to take the time to meet with the Lender’s officer involved and to work towards gaining acceptance of the Protocol.  By gaining general acceptance of the Protocol among lenders, the streamlined procedure gains wider acceptance in general.

Of course, if the Lender  will not accept the Protocol, the Lawyer should proceed in accordance with the Lender’s instructions.
 

Question:

5. What should a Lawyer do if another Lawyer in the transaction will not agree to adopt the Protocol even though the transaction is one that qualifies for the Protocol.

Answer:

Following of the Protocol is not mandatory and therefore a Lawyer cannot be compelled to follow it.  It should be clear however that the general positive effect of the Protocol in the conveyancing field is diminished if the Protocol is not followed wherever possible.

Question:

6. What is the suggested approach for presenting the Protocol to the client, and in particular, the Buyer.  If the Buyer’s Lawyer explains to the Buyer that the money will be paid to the Seller before the Buyer’s title is confirmed and the Buyer says “Insurance or not, I don’t want any part of it!”.  What then.

Answer:

The Protocol is a procedure designed to benefit the client and should be presented to each client in that way.  The Protocol will allow the Lawyer to close transactions on time, thereby avoiding the payment of interest on late funds and will dispense with the requirement of a Transfer back and Tenancy at Will.  Also, the need for interim financing will be avoided in many cases.

The Lawyer should not be reluctant to discuss the minimal risk of intervening registrations and the fact that any loss arising from the risk is fully covered and would be addressed and adjusted promptly.  The Lawyer should also be willing to discuss the Protocol in terms of the profession’s move to meet the competition emerging in the marketplace while continuing to offer the Lawyer’s expertise and experience which gives an extra measure of service and assurance to the client. 

However, as in the case of Lenders not prepared to adopt the Protocol, the Lawyer must follow the client’s instructions and proceed to close outside of the Protocol if instructed to do so.
 
Question:

7. Now that the purchase monies will be paid prior to registration, why has the registration of a Buyer’s Caveat not been included in the Protocol?

Answer:

The Protocol does not require a Buyer’s Caveat because your insurer has agreed to accept liability for losses arising from unknown intervening registrations when the Protocol has been used.  Situations may arise where the Buyer’s Lawyer chooses to register a Buyer’s Caveat and in those cases, the Lawyer should do so. It is to be remembered that one of the underlying purposes of the Protocol is to reduce the paper flow.

Question:

8. What should be done if the documents are rejected after the transaction has closed and the client either cannot be located or will not cooperate in making the changes necessary to achieve registration.

Answer:

If the Lawyer has followed the Protocol the chance of improper execution or completion of the documents submitted to the land titles office is small and any rejection will likely be the result of errors of a clerical nature. In those cases, the Lawyer is the agent of his or her client for the purpose of completing the transaction that the client entered into and is therefore justified in making corrections to the documents on the client’s behalf.  If the problem cannot be immediately resolved, report to the Alberta Lawyers Insurance Association.

Question:

9. Under the Protocol, how should we deal with a situation where the Agreement comes into the Lawyer’s office on the closing date or a day or two in advance of the closing date and the mortgage instructions and mortgage funds are not yet available?

Answer:

The Lawyers for the Buyer and Seller can make interim arrangements for possession (on the basis of a Tenancy at Will, for example) as they would normally do.  The mortgage however could not be funded or the purchase price paid under the Protocol until the requisite steps are followed.  Therefore the “Closing” as defined in the Protocol may have to be postponed by agreement in order to allow sufficient time for the Lawyers involved to take the steps required under the Protocol.

Question:

10. In the event of an insured loss under the Protocol, the relief will have to be immediate and effective in order to preserve the confidence of the Lawyers and the clients in the Protocol, will there be special procedures developed so that:

(a) the claims are promptly funded; and

(b) the occurrence is presented to the client and the coverage explained in such a way as to minimize the negative impact of the problem on the Lawyer in the eyes of the client and the insurers.  In the case of the insurers:

(i) will the deductible be waived;
(ii) will the premium surcharge be waived;
(iii) will the Lawyer’s claims history be unaffected.

Answer:

These claims will be promptly handled.  The deductible is being waived by ALIA for all claims now reported  and the levy surcharge of the Lawyer involved will be waived and the Lawyer’s claims record with the insurers will not be adversely effected provided that the Lawyer has adhered to the practices prescribed under the Protocol.

How the Lawyer is perceived by the client if a loss occurs will to a great extent depend upon how the Protocol is presented and explained to the client in the first place.  If the client is made well aware of how the Protocol works, the fact that the chance of a loss is minimal and that the loss is fully covered, the client’s confidence in the Lawyer should be maintained.

In the event of a claim, report it to the Alberta Lawyers Insurance Association immediately.

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