Avoiding ‘Inadequate Investigation’ Claims in Real Estate
Back in 1998, “inadequate discovery of fact or inadequate investigation” was the fifth most common cause of a claim when we looked at the top five reasons a claim was made against a lawyer. Since then the claims cause of “inadequate investigation” has climbed steadily upwards to the number one spot: By 2014, this category of errors had more than doubled in frequency. Moreover, claims resulting from inadequate investigation or discovery of facts also increased proportionately in terms of all LAWPRO claims, rising to 22 per cent of errors reported from eight per cent.
Why this significant increase in this type of error? Perhaps it is a symptom of “BlackBerry legal advice:” Quick questions, and answers without context exchanged between people in a rush. These claims go to the very core of what lawyers are supposed to do for their clients – give legal advice – and basically involve the lawyer not taking extra time or thought to dig deeper and ask appropriate questions on the matter.
Inadequate Investigation claims in real estate
The economic realities of real estate practice – the pressure to reduce fees in the face of increased competition – may be one factor prompting real estate lawyers to take on more files and spend less time on each file. Examples of failing to do adequate investigation in a real estate deal include:
- not delving into the client’s long-term plans for the property, and then failing to follow up on appropriate zoning or bylaw searches to ensure the client can use the property as intended;
- not ensuring that the client has capacity or is not under undue influence when transferring property;
- misreading a survey, search or reference plan;failing to review a condo status certificate and bring deficiencies to the client’s attention;
- on a condominium purchase, failing to ensure that the parking space and locker specified in the agreement of purchase and sale are actually for sale and that the legal description of both units is correct;
- not doing a title search on a commercial lease; and
- giving an undertaking to discharge a mortgage as vendor’s solicitor, but failing to carefully review and ensure the accurate scope of the discharge statement – in particular, failing to ensure that the statement reflects all sources or types of indebtedness owing by the vendor to the lender that are secured by the mortgage.
To avoid these claims, take the time to read between the lines so you can identify all appropriate issues and concerns. Ask yourself: What does the client really want? Does everything add up? Are there any issues or concerns that should be highlighted for the client? If something doesn’t add up – dig deeper.
This article originally appeared in the August 2012 issue of LAWPRO Magazine. All past issues of LAWPRO Magazine can be found at www.lawpro.ca/magazinearchives