Real estate lawyers wrestle with banks, contracts make social distancing work

That means many clients — an ill purchaser who can’t meet with their lawyer or moving company, a client who can’t get mortgage financing due to job loss, an investment property owner who can’t sell because the tenants aren’t moving out — can still be responsible for damages if they don’t meet legal obligations.

“The difference with the real estate practice area and, say, litigation practice areas is the courts can say, ‘We're turning off time limits.’ …. We don't have the option in real estate to do that,” says MacLennan.

 “So we have to find a way to work with everybody. I think everybody needs to try to be cooperative with one another, but it’s a fine balancing act. I want to be compassionate, yet, there's still legal consequences for not being able to perform a contract. So it puts people in a much, much stickier situation.” 

PRACTICAL ISSUES

MacLennan penned a March 20 document on closing real estate deals for the Federation of Ontario Law Associations. MacLennan says she has also has been answering calls from lawyers via phone and answering questions through the Law Society of Ontario’s sold-out real estate webinar about the virus. 

“A lot of the issues that came up at the law society program were practical, like ‘how do I deal with this? You know, my client is, is elderly and has no technology but is terrified to leave her house or apartment …. but yet she signed an agreement to purchase a condo,’” she says. 

“Somebody said, I'm in isolation. How do I get to my money? How do I get keys to them?”

With smaller land registry offices and bank branches shutting their doors, the reality is that deals will be more difficult to close, MacLennan says. Technology has helped in some cases — for example, documents can still be registered via Teraview, and documents requiring signatures can be discussed beforehand via a videoconference from separate rooms (or even separate cars parked next to each other). MacLennan’s  firm bought 25 Chromebooks with VPN software to deal with remote work requirements. 

But lawyers seeking to put in place technological solutions — such as wire transfers or direct deposits for incoming funds — may find they still need to visit a bank, she says.

“Right now, none of the banks are taking that discharge money by wire or by electronic transfer, I have to get a certified check and take it to the actual bank. If I've got to get a check written, somebody's got to prepare it. It's got to be signed. If it's a trust check, in our office, it's got to be signed by two people. And then it's somebody taking it to the bank and depositing it and giving it to a teller. You know, there's a lot of human interaction that can be reduced or eliminated if, if the banks can set up a system,” she says. 

“All the title insurance companies have confirmed there will be full fraud coverage even meeting remotely and are not getting wet-ink signatures. So we're trying to get that message out to banks because right now, really everybody should be minimizing their contact with other people as much as possible. I think it's unconscionable for banks to require in-person meeting now.”

CONDOS

Condos provide their own challenges, notes MacLennan. 

“To get the final declaration registered, we've got to get the condo declared and created so that we can transfer title to people,” she says. “But there's a lot of places working with reduced staff.” 

Christy Allen and James Davidson, partners at Davidson Houle Allen LLP Condominium Law, having been releasing blog posts around the clock for clients and non-clients alike, as litigation work has slowed and been replaced by COVID-19 concerns.

“We generally give advice to the boards and the managers. Condominium corporations in this COVID 19 crisis are very much affected. Take a high rise as an example. They've got people coming and going from these high rises, traveling through shared elements: lobbies, elevators. They've got courier packages coming to and from the building. They've got moves in and out of the building. They've got sales of units. And all of these things raise questions about social distancing,” says Davidson.

Time that was once filled with weeks of discoveries, motion dates, examination hearings in person are now spent helping clients figure out how to adequately clean when tenants move in and out, says Allen. As courts prioritize urgent matters in family law and criminal law, civil practitioners are exploring options like mediation for dispute resolution, Allen adds, noting that courts are beginning to bring some administrative processes online. Tribunals are another way condo lawyers may be resolving disputes – in the Licence Appeal Tribunal for example, has been efficient in adjourning and rescheduling matters, notes Allen.

“The normal work that we've been doing for condominium corporations we anticipate will slow . . . . we have not seen any need as a firm to reduce in size, or temporarily lay anybody off. We're finding we're needing all of our people at least so far, we're all actively busy,” says Davidson.

“Boards of directors get together, usually monthly, to sign checks and send us those check payments on our invoicing. And that is slowed for sure . . . . we see an increase in our receivables as a firm as a result of that. It's a natural result of this crisis, and it means that we as a firm have to borrow more. It doesn't necessarily mean a loss at the end of the day, but the bottom line is that we're doing a lot more sort of non-billable answering of questions about COVID-19.” 

REAL ESTATE INDUSTRY AT LARGE

A slew of practical issues have also cropped up for legal services providers. Tarion said homeowners may refuse access and builders may refuse to perform after-sales services during the COVID-19 pandemic without penalty, and that a variety of services will be postponed (conciliations, inspections, common element meetings and other in-person meetings).

LawPRO is also anticipating “greater delays” of more than 10 business days for the Real Estate Practice Coverage Option and has said it will not “send notices” or “follow up” on deadlines for quarterly real estate transaction filings. TitlePLUS said it will not require an in-person meeting with clients for the purpose of getting a policy “in the context of COVID-19.” TitlePLUS is also preparing to help lawyers who can’t obtain off-title searches before closing, and for a potential land registry closure.  

In addition to the practicalities of running a practice, lawyers are reckoning with far-reaching impact on the broader real estate industry amid the containment of COVID-19. For example, Davidson says, even as condo owners may be faced with increasing financial pressure, his firm is operating under the impression that condo liens are still subject to the same three-month deadline. These types of issues continue to cause confusion in the bar, says Davidson.

It’s one of many deadlines in flux across different industries and authorities. Osler, Hoskin & Harcourt LLP’s real estate bulletin notes that different provinces have issued different plans for dealing with mortgage payments, commercial leasing, residential landlords and property taxes.

MacLennan says that it is possible the courts will view real estate timelines differently in a post-pandemic world. One case about the upcoming closing of a pending real estate transaction and the possibility of a residential eviction has already prompted an Ontario judge to “provide clarity in order to protect the court’s ability to offer services in this urgent time.” 

In that case, Wang v 2426483 Ontario Limited, 2020 ONSC 2040 (CanLII), an endorsement and responding submissions argued over whether the matter was urgent and should be scheduled for hearing. 

“The letter referred to the moratorium on evictions and then argued about the lack of merit in the proposed proceeding. In doing so, counsel confirmed the applicant’s concern that the respondent would not voluntarily agree to refrain from selling the property while the parties work through their issues,” wrote Justice Frederick Myers. “  The Notice to the Profession asked everyone – litigants and lawyers alike – to recognize the exceptional times and to try to cooperate to avoid the need for court proceedings where possible.. .. There is no need for submissions on the merits of the proposed proceeding before and certainly not after the scheduling determination has been made. The court has very limited access to staff with full computer capabilities at present. Much back and forth about urgency, the merits, and parsing of the terms of the Notice of Profession are literally clogging up the Motion Coordinator’s email. 

This is not required. In the main it is not helpful. And it must stop.”