This toolkit provides practice tools to help lawyers respond to some common lender instruction requests in residential real estate transactions.
When responding to requests, limit the scope of your legal services to matters within your expertise. Restrict opinions to matters of law where you have conducted appropriate due diligence, and do not give opinions on questions of fact. When a request falls outside your expertise, provide the lender with applicable third party information, identifying the source. Avoid any implication that you have expertise in the matter. You should take the time to read Opinions on title or title insurance, which outlines the risks of providing an opinion on title to a lender when title insurance is in place.
- Access to the property – one material fact on marketability is legal access to the property.
- Borrower identification requirements – completing forms confirming compliance with a lender’s identification requirements.
- Building compliance issues – addressing building compliance issues with borrowers and lenders.
- Changing lender instructions – strategies for modifying problematic lender instructions.
- Conflicts of interest – Lender/borrower-purchaser - a common practice does not relieve a lawyer from the requirements of the Code of Professional Conduct or reduce the lawyer's standard of care.
- Conflicts of interest – Vendor/lender/borrower-purchaser - generally you are not allowed to act for all three parties.
- Duty to inform lender – understanding the lawyer’s duty to advise a lender of information about the borrower or about the property that would affect the lender’s interests.
- Easements and rights of way – the risks of providing an opinion on easements and rights of way that may be registered on title, hidden or created by use over time.
- Encroachments and other encumbrances – limiting opinions on the marketability of title given all the possibilities for encroachments and encumbrances.
- Independent legal advice – may be obliged to advise a client of the need for independent legal advice
- Insurance – relying on the insurance certificate or binder provided by the insurer, broker, or borrower, and leaving the determination of replacement cost to others.
- Opinions on title or title insurance – the risks of providing an opinion on title to a lender when title insurance is in place.
- Private water supply – the risks of confirming that well water is safe for human consumption or that a private water supply is adequate for use of a mortgaged property.
- Reliance on mortgage payout statements – the risks when obtaining a mortgage payout statement from the existing lender on title
- Responsibility to “ensure” or “certify” – the request to “ensure” or “certify” maybe beyond the scope of your professional responsibilities.
- Retention of mortgage documents – lender requirements for retaining original documents after closing.
- Searches – understanding when a lawyer has a duty to a lender client to conduct a search outside of the land registry for judgments and security interests against a borrower or guarantor.
- Septic tanks - the risks of providing an opinion on the status, shelf-life or satisfactory operation of a septic system.
- Surveys – reviewing and reporting on surveys to identify potential problems.
- Title insurance coverage for legal services – understanding the limitations of title insurance policies for legal services.
- Western conveyancing protocol – applying the protocol to single-family and condominium residential real estate transactions in Manitoba, Saskatchewan, Alberta and British Columbia.