LSO to consider tightening regulations on kickbacks to real estate lawyers from insurance co's.

Ontario Regulators are now considering whether to alter the restrictions placed on real estate lawyers who obtain kickbacks and other perks from title insurers.

According to audit data obtained in 2016 and 2017, 1 in 3 real estate law firms which deal with title insurers are not disclosing the financial agreements they have in place with certain insurance companies, according to a June 2018 LSO report.

In order to function properly, title insurance companies go to lawyers to obtain certificates of property titles. In a bid to get business from certain lawyers, some insurers are giving payoffs to lawyers for the service, and in can be in the form of free cruises, fees, and other perks which may or may not be disclosed to clients, thus potentially raising the cost of premiums to the unsuspecting final customer.

According to the Rules of Professional Conduct, lawyers are supposed to be telling clients that title insurance is not necessary. The rules also indicate that lawyers ought to be giving their clients full disclosure of any fees obtained to the benefit of the lawyer from the insurance company.

Audits in recent years seem to indicate these rules are only followed by about two thirds of lawyers engaged in such real estate-title insurance matters.

In certain U.S. jurisdictions such as New York, the tactics used by insurance companies to attract ongoing relationships with real estate lawyers has led to tighter regulation and scrutiny in recent years.

According to the report last year, the issue of title insurance is expected to come before Convocation sometime in early 2019.