Legal Blog

Quick Closing Risks

Real estate lawyers are often presented with quick closings. Normally, they can put themselves in high gear and complete all searches before closing. In Sheardown v. Slater (1997, O.C.G.D. Thomas J.), the solicitor was presented on December 19th with a closing set for December 20th. Even worse, he was to act for the purchasers.

Disturbing

What bothers us the most about this case is that the solicitor quoted a fee of $600 to complete the transaction. He did not even receive the agreement of sale until December 20th. Not only was the solicitor to act on the purchase, he also had to act on that part of the transaction that included a loan from the builder/vendor and a collateral second mortgage on the purchasers’ condominium. All this for $600! The real estate bar in Peel seems to delight in committing economic suicide.

Problems

The condominium had been refinanced shortly before. As a result, 2 mortgages and 3 liens had been repaid, but not yet discharged from title. Of course, their discharge was requisitioned. The solicitor testified that he called the solicitor who had acted on the refinancing and determined that all encumbrances had been paid and that it was just a matter of proof. He testified that he spoke to the secretary of the vendor’s solicitor and she told him that the vendor would only accept discharges of the encumbrances. The closing of the transaction was postponed on 3 occasions, ultimately to December 31st, but was not completed. The vendor re-sold quickly and claimed the purchasers’ $30,000 deposit. The purchasers sued their $600 solicitor. Surprise!

Deficiencies

The solicitor had not written a letter to the vendor’s solicitor informing him of the prior refinancing. The solicitor had not obtained the reporting letter of the refinancing, a letter that also set out details of the repayment of the encumbrances. Even worse, the vendor’s solicitor had faxed a letter at 2:00 p.m. on December 31st alleging that the deal was not closing because the purchasers had insufficient funds. The solicitor did not call the vendor’s solicitor to testify. This came back to haunt the solicitor.

Classic

The trial judge simply did not believe the solicitor’s allegation that the vendor’s lawyer refused to accept anything less than discharges of the encumbrances or that the solicitor even “made reasonable alternative proposals … that were rejected”. The solicitor was held liable to the purchasers. This is a classic case of a real estate solicitor putting nothing in writing, attempting to do everything by telephone, and not going the extra mile to earn that $600 fee. By the way, the solicitor never even rendered his account.