Law Times

PAGE 10 FOCUS January 19, 2009 • Law Times Law grows to target developer Continued from page 9 you're a developer and if you sell one house the following year, you're still subject to the require- ments. You don't file annually but the requirements involve re- cord-keeping." Adriano was a guest speaker last month at an Ontario Bar Association continuing educa- tion session providing lawyers with insights into what the new regime involves for their clients. Her presentation generated discussion and questions regard- ing some of the requirements and how lawyers can best assist developers with their clients. The legislation was phased in as a requirement first for fi- nancial institutions, then for real estate agents and brokers, before becoming effective for developers. Federal authorities have de- termined that developers are vulnerable to money laundering schemes and real estate invest- ments have been used by crimi- nals to hid money and assets. Adriano outlined the require- ments of the legislation, which are generally threefold. First, FINTRAC mandates that developers establish a compliance regime with which they must undertake a risk as- sessment of their vulnerabilities based on their geographic loca- tion, client relationships, sup- pliers of products and services, and implement means to track money handled by staff. The second aspect is an obligation to report transac- tions involving cash amounts exceeding $10,000, or any transactions a developer deems to seem suspicious. Third, developers will be required to identify individu- als, corporations, or legal enti- ties that purchase a new home or building, or any party that provides funds in any amount as part of a property purchase. The identification informa- TitlePlus_LT_Jan19_09 1/12/09 3:11 PM Page 1 tion that FINTRAC requires is specific: name and address, date of birth, and all parties' occupations. They must also keep receipts by web cam. "Every time they receive funds they have to keep a re- cord," she says of developers. "So lawyers were asking 'What will my clients have to do in or- der to comply?'" She acknowledges that for developers, "It's quite a bit of work initially in setting that up." Some lawyers have raised 'Once you're defined as a real estate developer you're always defined as a developer,' says Sylvia Adriano. for transactions of any amount and ensure they hold on to them for at least five years and provide the requisite records to FIN- TRAC upon request. "People were concerned that this would be very paper inten- sive for real estate developers," says Adriano of the lawyers in attendance either in person or who logged on to the session questions about the require- ment to confirm the identifi- cation of purchasers or sellers, along with their occupations. "My friends who are real es- tate agents are having a lot of grief, probably everyone is," observes Jeffrey Schwartz, of Schwartz & Schwartz who cur- rently presides as chairman of the OBA's real property section. "People have clients who've been friends for 10, 15 years, and they're now required to ask them for ID." Schwartz says for lawyers, however, the law "is not as bad as it sounds. Lawyers such as real estate lawyers have been battling money laundering, terrorism, and fraud for some time," he says. Referring to his law practice as relatively general and one of fundamental conveyance when it comes to real estate deals, Schwartz emphasized no lawyer is necessarily immune from hav- ing a brush with a fraudulent transaction. "I was part of a file where when we dug enough into it and a fraud was discovered and the lawyer on the other side who was representing the bor- rower [appeared] to have been duped," he shares. "So this is not new to us," he says of the real estate bar. "It's just spreading out that obliga- tion a little bit further into our practice." To assist clients, many firms, especially those that are larger, have notified their developer cli- ents and provided information to assist them with compliance requirements. Adriano also says FINTRAC professionals are particularly helpful in assisting developers, lawyers, and any parties requir- ing help with compliance. Stephen Karr, a partner at the boutique commercial/real estate law firm of Harris Sheaffer LLP, agrees that the requirements will present a challenge for developer clients at the outset as developers establish new administrative rou- tines and train their staff. "Just as with any other legis- lative change, it will ultimately become just part of the ordinary operating and sales procedure," he says. Karr adds that it will be in- teresting to see how developer clients will fare with identifying what could be "suspicious trans- actions" under the legislation. "We live in a global village and many units here in the GTA are often sold to investors, both here and abroad, through agents, friends, and relatives. Some buy one unit, others may buy several units," he explains. "With few exceptions, the Everything you need Together we have all the tools The TitlePLUS® Program works with you to help protect your clients from title risks.1 assist you, through our legal services coverage2 result of an error or omission in your real estate transactions. To ensure your clients get the most comprehensive coverage in one policy, take a look at the TitlePLUS Program, your Bar-related® real estate partner! With the right tools we , by reducing the inconvenience of dealing with a loss as the transactions are very ordinary and have typical deposit struc- tures. So, absent some very un- usual or suspicious behaviour on the part of a buyer, how that will actually manifest itself in a practical sense at a condo- minium sales pavilion where in-house marketing staff are trained to sell units and seal the deal as quickly as possible, we have yet to see. "The procedures to be put in place, such as identifying buy- ers who are not physically pres- ent, or sourcing the funds, must be complied with by developers and will likely slow down or delay the process of 'sealing the deal,'" says Karr. "All of it just makes the art PROTECTION AS GOOD AS IT GETS 1-800-410-1013 2 Excluding OwnerEXPRESS® policies and Québec policies. ®TitlePLUS, the TitlePLUS logo, OwnerEXPRESS and LAWPRO are registered trademarks of Lawyers' Professional Indemnity Company. ®BAR-RELATED Mark is a registered Mark of North American Bar Related Title Insurers used by LAWPRO under License. titleplus.ca 1 Please refer to the policy for full details, including actual terms and conditions. The TitlePLUS policy is underwritten by Lawyers' Professional Indemnity Company (LAWPRO®). Contact LAWPRO for brokers in Saskatchewan, Manitoba, Alberta and Québec. of the deal that much more complicated and nuanced," he acknowledges. "That's just the new reality." His firm has provided its cli- ents with a memorandum in a form that spells out the require- ments of this legislation to assist them with compliance. The new compliance require- ments can be found on FINTRAC's web site at www.fintrac.gc.ca. 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