Understanding Mortgage Closings with Dual Representation for a Private Mortgage

Published on 29 August 2022, 07:22:56 AM

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When it comes to private mortgage transactions in Ontario, Canada, lenders and borrowers are required to have legal representation. As such, it’s important to understand the rules and guidelines put in place by the Law Society of Ontario as it relates to dual representation in this scenario. So, let’s dive into what exactly dual representation is and what rules govern dual representation as it relates to private mortgage closings.

In simple terms, dual representation is when one lawyer represents both parties in a transaction. Here, that means having the same lawyer represent both the lender and borrower in a single, private mortgage closing. Generally speaking, Rule 3.4-12 of the Rules of Professional Conduct states that a lawyer (or two or more lawyers in partnership) cannot represent both parties unless certain exceptions apply. These exceptions are as described below.

First, dual representation may be allowed if the lender falls under the definition of a “lending client,” which includes entities like banks, trust companies, credit unions, and more. Second, lawyers practicing in remote areas with no convenient alternatives for legal representation could be exempt from the general prohibition. Third, the loan amount must not exceed $75,000, so dual representation could be allowed for cases where the mortgage or loan is below $75,000. Fourth, it may be permitted if the lender and borrower are not at “arm’s length” as defined in the Income Tax Act of Canada. Lastly, an exception may be granted where the lender is selling real property to the borrower, and the mortgage is part of the purchase price.

Lawyers must carefully follow these rules to ensure ethical conduct in private mortgage closings, thereby upholding fairness and integrity in the process. By following the guidelines set by the Law Society, legal experts can guarantee equity, honesty, and ethical behavior during private mortgage closing procedures.