A Pragmatic Approach to Rule 30 for Residential Transactions

The CBAO Real Property Section prepared the following article on Rule 30. It was released at the 1998 Annual Institute and printed in the Abstract Page. You may find it helpful when considering your obligations under Rule 30. Please note that every lawyer needs to reach his or her own conclusion about compliance with the Rule. This article represents just one view from the Real Property Section and is in no way binding on the Law Society of Upper Canada. If you have any questions, please contact the CBAO at (416) 869-1047 or 1-800-668-8900, or visit their web site at www.oba.org. Note: Rule 30 has been amended and now resides within Rules 2.02 and 5.01. For the full text of the new Rules of Professional Conduct, click here.

1. What's Rule 30 Really About?

There has been a great deal of concern over the recent addition by the Law Society of Upper Canada ("LSUC") of Rule 30 to the Professional Conduct Handbook ("Rule 30"). This anxiety is fueled by the profession's unfamiliarity with Rule 30, as well as by the lack of a practical understanding of Rule 30's application to the typical real estate conveyance.

In brief, Rule 30 provides that:

		Lawyers must be familiar with the options to assure title and should formulate a reasonable approach to knowing when and how to use them. Clients should be told that title insurance is not mandatory and that a lawyer's opinion can still be used.
		Lawyers can be retained by title insurers to provide legal services but are not to accept kickbacks, commissions or referral fees and must let their clients know that these types of compensation are not permitted.
		Lawyers should not let support staff give advice on title insurance without proper supervision and opinions on title insurance must come from a lawyer.
		Lawyers must tell clients that TitlePLUS is a product offered by LAWPRO (their malpractice insurer) and that LAWPRO is owned by the LSUC, the body that governs lawyers.

Rule 30 is no more than a re-iteration (in a title insurance context) of previously existing obligations under the Rules. Rule 2 imposes on lawyers the obligation to provide open and unbiased advice based on sufficient knowledge of the issues at hand. Commentary 8 under Rule 9 expressly prohibits hidden fees or kickbacks to the lawyer. Rule 16 expressly provides that lawyers may permit non-lawyers to act only under the supervision of a lawyer. Rule 5 requires complete disclosure by the lawyer where there may be any perceived conflict of interest on the part of the lawyer.

2. How to Comply with Rule 30

In order to meet the obligations imposed under Rule 30, a lawyer should have a basic understanding of how title insurance works, the products available, and any material differences in coverage.

The CBAO, LSUC, and others provide programmes and materials on title insurance and you have an obligation to use these opportunities to enhance your understanding of the available options. In addition, the CBAO booklet described below and the CCH Real Estate Law Guide chapters on title insurance are useful resource materials. Armed with this basic working knowledge, a lawyer will be required to exercise his/her judgment to determine whether title insurance is an appropriate alternative.

Some lawyers may prefer to exercise their judgment on a deal by deal basis by developing thumbnail rules to follow. Depending on their individual circumstances, other lawyers may make a general decision that a title insurance solution is appropriate for every deal and develop their practice around same. Conversely, the determination may be that, absent extraordinary problems, a traditional opinion is the appropriate route to follow for residential transactions. Rule 30 does not require a lawyer to provide all options but only to advise the client that different options exist.

The booklet, "Working With A Lawyer When You Buy A Home" (the "Booklet"), has been published by the LSUC and CBAO to assist lawyers in discharging the obligation to advise clients about the options available when purchasing their home and the material differences in the available policies. Although there is no obligation on a lawyer to use the Booklet, it was designed to inform the client about each option and provide disclosure about the rule against commissions and referral fees and about the relationship between lawyers, LAWPRO and the LSUC. If you don't use the Booklet then you must provide the client with advice on title insurance options either in person or in an initial letter.

In order to discharge your Rule 30 obligations, you must:

		Advise your client what options are available;
		Advise your client which option you recommend (including a brief discussion of cost implications and policy differences if material and
		Confirm in writing or by memo to file your client's instructions.

You can provide the above Rule 30 advice in a meeting with your client, in a telephone call with your client or in an initial letter to your client.

Providing the Booklet to your client will discharge your obligation to advise of the available options and material differences in policies. The Booklet can be provided to your client in an initial letter or a meeting.

If later on in the transaction, new circumstances or problems come to light, it may be appropriate for the lawyer to revisit (with the client) the earlier decision on which option was most suitable for the transaction.

If you are not eligible to provide title insurance policies from a particular carrier, you will have to advise your client of this limitation if, and only if, it is clear that your client should be using a title policy from that carrier. It is suggested that you consider this issue in advance and either ensure eligibility from each carrier or develop a firm policy for when this issue arises.

Lenders are entitled to Rule 30 advice. Most Banks, Trust Companies and Life Insurance Companies and other high volume lenders will have reviewed and approved title insurance policies and will not require further advice. When a Lender requires Rule 30 advice, guidelines set out above for Purchasers can be followed.

1. You must obtain a working knowledge of title insurance alternatives and the major differences in available policies. CBAO and LSUC programmes on title insurance, the CBAO booklet and the CCH Real Estate Law Guide are helpful.
2. You can make general decisions about title insurance but you must be aware of exceptional circumstances in a particular transaction.
3. You can discharge your Rule 30 obligations in an initial letter although a personal meeting is preferable. The letter will detail the options, material differences, if any, and your recommendation. You can also attach the Booklet and include your recommendation in an initial letter to your client.
4. Lenders who have approved title insurance policies require no further Rule 30 advice.
5. Other lenders may require advice in the same way as purchasers.