A lawyer raised the following with me:
1. Mr. Jones signs an agreement of purchase and sale to sell to Smith and then dies, before closing. He has signed no other document, just the agreement of purchase and sale.
2. Jones’ lawyer takes the position that the agreement of purchase and sale is sufficient authority for the lawyer to sign a transfer in Teraview and close the deal on behalf of the dead man. Smith’s lawyer closes the deal with Jones’ lawyer signing in Teraview on behalf of Jones, knowing that Jones died.
3. New lawyer is now acting for Brown, a buyer from Smith. He knows that Jones died before the transfer to Smith was registered.
Is the transfer signed and registered by the Jones’ lawyer void? Did good title pass to Smith? What if Jones had signed an acknowledgment and direction and then died?
I asked our friend, Jeff Lem, who like me is running for re-election as a bencher, what he thought. It was an interesting conversation. This was his answer in part.
“Even if you thought that you had 100% authority to convey (including a signed acknowledgment and direction), the moment your owner dies, that authority is arguably lost in favour of the estate trustee. This is different than in paper, where the lawyer was just a registration agent of a signed, sealed and delivered deed. In e-reg, the lawyer is not just a registration agent. The lawyer has to actually digitally “SIGN” for the dead person, and that is done in Teraview, using the lawyer’s key, upon registration of the transfer. In my view, the lawyer cannot do it. The other way to think of it is, the acknowledgment and direction is a glorified special purpose power of attorney. Like every other power of attorney, it dies immediately on the death of the donor. In your particular case, I don’t think that there is ever an argument that says ‘since I am sure the owner would have wanted me to close the deal, the agreement of purchase and sale must be my authority to go ahead and digitally sign a transfer in Teraview for the dead person!’”
The better question may be what kind of title does the buyer get? Is the electronic signing of the transfer for a dead man a forgery? Is it illegal and against the law i.e. the Estates Administration Act?. What if the lawyer already had the executed closing documents including the signed acknowledgment and direction and the man died the day before closing? If there is no registration of evidence of his death on title, who will know? What is our ethical and professional obligation to uphold the law when, for expediency and having happy clients, we can hold our nose and close? The LRO won’t know. Who will challenge the legality of the transfer?
In this case, because Brown’s lawyer knew of the date of death of Mr. Jones, I suggested a Vendors and Purchasers Act application. Another question: Must the lawyer disclose the information to the title insurer when ordering a policy? What do you think the title insurer would say?
There is a case that some may want to rely on: Winarski v. Sproul (2015 ONSC 812). Here, the mother signed and delivered a transfer to a son but the transfer was never registered. Was the transfer valid so that the son was entitled to the property. The court said yes. This case is based on a title in the paper system where a transfer had been signed and delivered by the mother but never registered. In the paper system, as some will recall, title passed when it was intended to pass and that signed, sealed and delivered deeds or transfers passed title. Registration did not change anything, except as against third parties. That is very different from a case where the title is not intended to pass until a closing date and when, in the land titles e-reg system, a transfer is not signed until the transfer is in fact signed in Teraview by the person authorized to sign the transfer on behalf of the transferor. Besides, in Winarski, the deceased’s deed never actually got registered. Instead, it was used as evidence of intention to get a vesting order.
More questions: does certification in Land Titles solve the issue? Jeff Lem would say that actual notice of the improper signing of the transfer is a common law qualification to absolute title, so that won’t help. And if Jones’ lawyer is correct, i.e. that all you need is a signed agreement of purchase and sale to give you authority to sign a transfer in Teranet, why bother with acknowledgments and directions, why bother with probate, why not just rely on a “story” from the heirs that “Dad always wanted us to sell the property when he died” so that is authority enough for the lawyer to sign the transfer on behalf of dead Dad? Seems like it might be a very slippery slope.
Definitely not easy. And who says real estate law can be done by paralegals? (Anyone remember the Cory report? I do.) What’s so hard about practising real estate?
I have always said, don’t make the client’s problem, your problem. What would you do?
Once again, my disclaimer: The issues raised in this email bulletin are for information purposes only. My comments should not be relied upon to replace specific legal advice. Readers should investigate all matters independently before acting on the basis of material contained herein. I reserve the right to be wrong and to change my mind. Use at your own risk.
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Once again, my disclaimer: The issues raised in this bulletin are for information purposes only. My comments should not be relied upon to replace specific legal advice. Readers should investigate all matters independently before acting on the basis of material contained herein. I reserve the right to be wrong and to change my mind. Use at your own risk.