Law Times

Law Times • June 10, 2013 Page 9 FOCUS Lawyers still 'not getting' new fraud rules Mortgage schemes continue despite guidance on reckless behaviour BY CHARLOTTE SANTRY Law Times L awyers are "not getting" stricter Law Society of Upper Canada rules aimed at preventing mortgage fraud, according to a Toronto real estate solicitor and barrister. Speaking at an LSUC event on May 23, Joel Kadish reminded lawyers they must abide by amendments to the Rules of Professional Conduct introduced last October. "We're still not getting it," said Kadish, who has his own practice and has lectured at the Ontario Bar Association and Ryerson University. Rule 2.02(5) explicitly prohibits a lawyer from "knowingly" assisting in or encouraging dishonesty, fraud, crime or illegal conduct. The amended wording sets out scenarios lawyers need to be wary of and clarifies that "knowingly" may include wilfulness, wilful blindness or recklessness. The LSUC also provided a series of "red flags" for real estate transactions that cover purchase price manipulations, straw people, and suspicious third-party involvement. Kadish set out some practical tips aimed at helping lawyers avoid flouting the rules. For example, he recommended properly identifying clients to reduce the risk of acting for people who may not exist or whose identities have been purchased or stolen as well as cases where there's a suspicious use of powers of attorney. "One of the first questions I ask is how did you come across me? If they mention someone's name, I send that person a quick e-mail saying thanks for the referral," he said. Doing so can help verify the information given as well as be "great for marketing," he added. Lawyers also have a "professional obligation" to stay updated on fraud issues by, for example, signing up for LawPRO's Avoid a Claim blog, he suggested. Kadish shares office space with other real estate lawyers, an arrangement he said allows them to regularly discuss potentially ambiguous areas before problems arise. "I encourage you to either enter into a mentor/mentoree situation or find colleagues to share space with." He added: "Don't think you know it all, you've seen it all, because you haven't." Sometimes the dilemma faced by real estate lawyers isn't that someone is asking them to act dishonestly or illegally but to assist in potentially unethical transactions. This is particularly true when lawyers are acting for several different family members, normally on a joint retainer. Presenting at a separate session, real estate lawyer Maurizio Romanin said something to watch out for is unsophisticated parents who loan their children money for property transactions. "I've been in situations oftentimes where children are telling their parents this is a deal too good to be true. Most of the time, it turns out to be too good to be true and often it's the parents' money that gets lost." It's important for lawyers to have a full understanding of who they're acting for in these types of situations. For example, a father who's an ongoing client may insist on his own lawyer helping his sons, but what if halfway through the joint retainer it becomes clear that his interests conflict with those of his children? "At the beginning, it's really important to establish who you're acting for," said LSUC senior competence counsel Caterina Galati. As a result, she suggested a lawyer should raise the possibility that the father would need to consider getting independent legal advice at an early stage, including during discussions on the joint retainer. In addition, it would be prudent to find out whether the money is a gift or a loan. Lawyers must also avoid getting dragged into messy marital disputes, according to Romanin and Galati. They used the example of two brothers who are buying a property together but wish to place it under only one of their names at a time when the other is having marriage problems. "You can't be seen Radomsky told particito be hiding assets in the pants. Many lawyers will middle of a messy divorce," recognize his definition of said Romanin. a difficult client as one who However, there are "doesn't follow your advice, times when playing by the someone who is difficult rules can "rise up and bite to find, often unreachable, you," particularly regardacts independently despite ing those governing inforinstructions to the conmation disclosure among trary, someone who would parties, he added. like you to do something "In my first year of practhat is entirely unethical." tice, I got a developer cliThe best solution, he ent," he explained. The client suggested, is to anticipate had previously worked as a the bad behaviour by exsalaried employee and had a plaining in an introducmortgage approved on that basis. "I had to disclose [his Lawyers should be cautious when deal- tory letter how clients new occupational status] to ing with unsophisticated parents who loan should conduct themselves the bank and it was an ex- their children money for property transac- and making it clear that the lawyer will be unable tremely problematic and dif- tions, says Maurizio Romanin. to work effectively unless ficult situation because my they're available by phone and e-mail. client believed I'd sold him out to the bank." Sometimes, it's necessary to tell clients Tricky solicitor-client relationships are often manageable. But when clients' behaviour who insist on taking an unwise path to find makes it difficult or impossible for lawyers to other representation. "At some point, you do their jobs, they need to consider a special have to concern yourself with your own LT approach, real estate lawyer and educator Lou safety," said Radomsky. The title insurer that puts you front row, centre Putting the legal community front and centre has made us the #1 choice with Canadian lawyers for over a decade. While other title insurers go head to head with you for your business, Stewart Title does not support programs that reduce or eliminate the lawyer's role in real estate transactions. Instead, we focus on what matters to you: • unsurpassed policy coverage • competitive pricing • underwriting expertise At Stewart Title, we keep real estate transactions where they belong – in your office! 1-888-667-5151 or www.stewart.ca ON Untitled-3 1 www.lawtimesnews.com 6/3/11 11:24:18 AM

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