The Mortgage Instructions Toolkit offers practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses conflicts of interest when acting for the vendor, lender, and borrower-purchaser.

The situation

In some situations, you may be asked to act for all three parties in a residential real estate transaction: vendor, lender, and borrower-purchaser.

The rules in your Professional Code of Conduct generally would not allow you to act for all three parties, however there are some circumstances when this is permitted.

Sample lender instructions

For provinces other than Quebec, if this is a purchase transaction, you or any other employee/partner of your firm must not act for the vendor, unless the Bank has provided you or any other employee/partner with the Bank’s written consent.

Practice guidance

The Law Society of Ontario Code of Professional Conduct rules, for example, allow a lawyer to have a retainer with all three parties when:

• The parties are “related persons” as defined by section 251 of the Income Tax Act. 
• Clients are in a remote location and it would be an “undue inconvenience” for a client to find another lawyer.

Notwithstanding that the Rules may allow you to act, most lenders require that you have their express written consent before acting for the vendor as well as the borrower-purchaser.

When another lawyer in your firm is acting for the vendor and you are acting for the lender and the borrower-purchaser, follow the usual conflict rules setting up the necessary screens and separations between you and the other lawyer.

Note: Professional insurance may treat any problems with a transaction where you represented both the vendor and the borrower-purchaser as two claims, leading to two deductibles and two surcharge levies.

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