Iam not an apologist for the Law Society of Upper Canada or LawPro, but I amsurprised at the letters I periodically receive from solicitors bellyachingabout the real estate transaction levy. Their criticism of the levy is illconceived.
In
June 1994, Convocation established a task force to deal with an insurance
deficit of $154 million and to examine the nature of the law society's errors
and omissions insurance program. One of the task force's recommendations that
was implemented was the real estate transaction levy, which currently is $50
per transaction.
A
recent letter summed up the complaint. The writer lamented that the insurance
crisis is long past, yet the levy continues, and he said he has no explanation
for his clients as to why the surcharge exists.
Lawyers
may criticize the law society and LawPro for many things, but the real estate
transaction is not one of them. In the first place, on a real estate purchase
that is title insured, the transaction is exempt from the levy. Apart from
that, title insurance makes economic good sense, both for the client and the
lawyer. The cost of title insurance is often offset by the saving on other
disbursements (there is usually no need for a tax certificate and building
department clearance letter, etc., in most residential purchases) and generally
transfers the risk of a claim against the lawyer's own negligence insurance to
the shoulders of the title insurer.
Secondly,
the money received from the real estate transaction levy enables negligence
insurance premiums to be lower than they would otherwise be.
Finally,
when the transaction levy must be paid, for example on sale transactions, it
can be charged as a disbursement to the client.
I
corresponded with Michelle Strom, LawPro's president and CEO, about this topic.
She
pointed out that revenue from transaction and claims history levy surcharges
represent about 30 per cent of LawPro's revenue for the mandatory negligence
insurance program. Transaction levies ensure an element of risk rating in the
program, as real estate and civil litigation represent a disproportionate risk
when compared with other areas of practice.
Real
estate claims last year represented 30 per cent of the claims costs of the
The
use of transaction levies avoids the dislocation that would occur if base
premiums were increased to reflect the risk. Transaction levies are an equitable
way to achieve risk rating in the insurance program.
For
solicitors who rely on ordinary real estate transactions as the backbone of
their practice and struggle to survive, pointing the finger at LawPro's real
estate transaction levy is fingering the wrong culprit. This is one instance
where it would be more appropriate to point the finger at ourselves.
We
have allowed the ordinary real estate transaction to become a commodity rather
than a service. Competition has become based on the amount of the fee charged
rather than the quality of the personal service rendered.
The
suggested fee schedule of the Toronto Lawyers Association provides a fair and
reasonable guideline for real estate transactions, yet how many lawyers in the
Greater Toronto Area use it as a guideline? The conscientious handling of a
real estate transaction involves counselling and advising one's client, not
only doing the work itself properly, yet a commoditized fee, set in advance,
does not permit this.
Litigation
lawyers, especially good ones, understand the folly inherent in the
commoditization of legal services, but the real estate bar has failed to come
to this realization.
One
thing I have learned in 35 years as a lawyer and 10 years as a bencher is that
the law society will not be the saviour of the profession, particularly sole
practitioners and small firms for whom real estate is a linchpin of practice.
Our only saviour will be ourselves, and that involves a change of mindset and
charging what our services are truly worth.
Keeping
time dockets for yourself on real estate transactions, requiring your staff to
do likewise, and dealing personally with your clients, giving them the
counselling and advice they should have, will be a good impetus to start
charging what your services are worth and to disregard the skimpy fees charged
by the mass production artist down the block.
Gary
Lloyd Gottlieb, a
