by Tim Lemieux

No matter what the area of practice, the number one source of claims at LAWPRO is a breakdown in communication between the lawyer and client.

Between 2008 and 2013, nearly 4,600 communications claims – an average of 762 a year – have been reported to LAWPRO. The total cost of these claims to date is about $158 million – and likely to rise as more recent years’ claims are resolved.

In the Fall 2011 issue of LAWPRO Magazine we asked LAWPRO claims counsel with expertise in the various areas of law to provide insights into the communications mistakes they see in their daily handling of claims files. We hope this approach makes it easier for you to implement risk management steps in your own practice.

Real estate claims make up the largest share of communications claims. Busy, high-volume practices often lead to situations where the lawyer is not taking the time to communicate with the clients properly. Mitchell Goldberg, unit director and counsel and Nadia Dalimonte, claims counsel, both in our Specialty Claims Department, provide some examples of the kinds of claims they see in this area of practice.

Meet the client – yourself – and ask questions

The common thread running through the examples that follow is that many real estate lawyers say they are too busy to communicate directly with clients. They rely on clerks, so the lawyers themselves become removed from the process. “It is always preferable for the lawyer to meet with the clients and review the important documentation in the file with the clients at that time. In the event of a claim, it’s not usually a strong defence for the lawyer to say to us ‘well, the clerk met with the client,’” says Dalimonte.

Some lawyers, she adds, take the position that their job is to carry out only the title conveyancing, when what they should have done is take the time to speak to the client to ensure they’ve gathered all the relevant information.

For example, although only one person may be registered on title, there could be a spousal interest in a matrimonial home. LAWPRO has seen a number of claims where the lawyer did not get the consent of the spouse to change the ownership status or encumber the property with a mortgage. Take the time to discuss important information such as the client’s marital status to determine whether the consent of a spouse – or any other person with an unregistered interest in the property – needs to be obtained, or whether the spouse needs to be sent for independent legal advice (depending on the nature of the transaction).

Another source of claims involves situations in which parents get involved in their children’s real estate dealings – such as the transfer of a parental property to a son or daughter, or the purchase of a home by the child with the parents guaranteeing the mortgage or taking title with the child and actually becoming mortgagors. The parents often later claim the lawyer did not properly communicate the potential consequences to them (e.g. if the children did not keep up the mortgage payments, the lender could come after them) or failed to send them for ILA.

There may be issues of capacity or language barriers preventing the clients from fully understanding the proceedings. Until you sit down and talk to the clients, these kinds of complicating factors might not be apparent.

Use title insurance wisely

Lawyers using title insurance also need to take the time to communicate directly with clients. Often the lawyer fails to ask clients about possible future uses of the property that the client might have in mind, and as a result fails to get a title insurance endorsement that would protect the clients (e.g., they planned to build a pool, but later discovered a subdivision agreement prevents it). Similarly, lawyers sometimes fail to discuss whether a client wants a survey or a particular search done.

“They just assume title insurance takes care of issues that could arise, so that the lawyer has no documentation in the file to demonstrate that the lawyer discussed what the client did or didn’t want,” says Goldberg. Failure to have that conversation may constitute negligence, and also may violate the commentary to the Rules of Professional Conduct that addresses informing clients about options to assure title.

Remember the lender client

Lawyers also need to remember that lending institutions are also their clients. We’ve seen claims in which lawyers have failed to communicate material information to the lender client so the lender can make an informed decision on whether to advance mortgage funds. Such details could include the correct purchase price, current ownership, or whether the purchaser is going to reside on the property.

Categories: Communication Errors