For the Record: Homebuyer protection

Consumer protection for homebuyers, for the record — December 8, 2011

Buying a home is very often the largest purchase we will make in a lifetime. The real estate transfer system is highly complex. Ontarians expect their government to minimize as much as possible, the risk of loss in real estate transactions.

Regulation 69/07 of the Insurance Act protects the homebuyer by ensuring that they receive independent legal advice.

This regulation says that title insurance cannot be sold to a homebuyer in Ontario unless the title insurance company receives a certificate of title from a lawyer. This means that a lawyer will be involved in a title insurance transaction. Importantly, the regulation also says that the lawyer in question cannot be in the employ of the title insurance company.

Title insurers are proposing changes to Regulation 69/07 that would substantially water down the protection it provides to Ontario consumers. This comes at a time when the government is carefully weighing options to enhance consumer protection and increase efficiencies.

The Law Society remains committed to protecting the public interest. Since the mid-1990's we have maintained the position that consumers must have access to expert independent legal advice and guidance when purchasing a home.

The most important test of a real estate conveyancing system is how it prevents botched real estate transactions and protects individual property purchasers from financial loss. The stakes are high; an improper transaction can leave a family holding a useless piece of property, with a costly mortgage, often wiping out their life savings. Independent legal advice is at the root of consumer protection.

Without Regulation 69/07, government would need to create numerous other regulations in order to ensure that the consumer continues to be protected.

It is also in the government's best interest to ensure that consumers receive a lawyer's advice. If consumers start turning away from the broad protection of legal counsel, and elect to purchase the narrow protection of title insurance, the number of real estate transfer problems will rise and families buying homes will risk undue hardship.

In fulfilling its mandate to protect the public interest, the Law Society:

  • Requires that lawyers have in addition to their standard mandatory insurance, coverage to assure expertise and consumer protection in real estate transactions.
  • Manages a compensation fund to provide compensation in the event of a dishonest act on the part of the lawyer - this is additional protection separate from the insurance program.
  • Provides clear rules of professional conduct setting out how lawyers must conduct themselves.
  • Requires its members to take mandatory continuing education as to their professional responsibilities.
  • Has a robust complaints and discipline process.

In the absence of significant consumer protection changes to insurance legislation, the current model, including Regulation 69/07 — and the Law Society working closely with governments, as it has done for twenty years — is the best option for protecting Ontario home purchasers.

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You may also wish to read LawPRO's perspective on the issue.