by Edward Wilson

In March 3, 2003 the Vancouver Real Property Section adopted a new form of standard undertakings that will change the way most real estate transactions in B.C. are closed.

The CBA has long had a representative on the B.C. Real Estate Association’s Standard Forms Committee. The Committee developed the Contract of Purchase and Sale that is used in more than 90 per cent of the residential sales throughout B.C. While the Contract has always addressed the closing procedure, prior to 1989, the closing provisions did not reflect the practice followed by lawyers. In 1989 the Court of Appeal in Norfolk v. Aikens (1989) 4 BCLR (2nd) 145 criticized the practice of closing on the basis of undertakings as that was a deviation from the strict terms of the Contract.

The Contract was subsequently amended to provide that the transaction would be closed on the basis of the CBA Standard Undertakings which were adopted following a consultation process to ensure that they reflected conveyancing practice in B.C.

Why the Changes
As a result of the “Wirick matter”, it was felt that it was necessary to review the Standard Undertakings to see if the closing procedures could be improved upon so as to reduce the potential of a lawyer choosing not to honour their undertakings. Through an extensive consultation process led by the Vancouver Real Property Section, a number of options were considered. Ultimately, the “transparency option” was selected and incorporated into the Standard Undertakings. The Standard Undertakings have been circulated to and commented on by the Victoria and Okanagan Real Property Sections, the Society of Notary Publics and the Executive of the CBABC.

What Are the Changes
The transparency option provides for the following changes to the conveyancing process when there are existing financial charges to be discharged. When the purchase monies are provided to the Seller’s lawyer by the Buyer’s lawyer, the Seller’s lawyer must, within five business days after closing, provide the Buyer’s lawyer with a copy of:

• The Seller’s lawyer’s letter providing the existing mortgagee with the payout monies together with a copy of the payout cheque and evidence of its delivery; and
• The payout statement or, where there is an “interalia mortgage,” a letter from the existing mortgagee confirming that the monies paid were sufficient to payout the mortgage as it relates to that property.

The documents are to be provided to the Buyer’s lawyer on his/her undertaking not to release the financial information disclosed by such documentation to the Buyer unless they have not been provided with satisfactory evidence of the filing of a discharge within 60 days of the completion date. The Seller’s lawyer further undertakes to use diligent and commercially reasonable efforts to obtain the discharge in a timely manner.

Adopting Transparency Provisions
The use of the CBA Standard Undertakings has never been mandatory. It was always anticipated that lawyers would continue to use their own form of undertakings, which are in most cases similar to the CBA Standard Undertakings. If the lawyers involved in a conveyance cannot agree as to the form of their respective undertakings, they should resort to the CBA Standard Undertakings. Such a position is still available today. However with the change to the transparency option, lawyers should revise undertakings to incorporate transparency provisions. The new undertakings will soon reflect the practice in B.C., and to deviate from the practice potentially opens up lawyers to additional risks.

Edward Wilson practises real estate and municipal law at Lawson Lundell. He is past Chair of the Real Property-Vancouver Section and continues to be actively involved in CBA and CLE matters. Mr. Wilson has been the CBA’s representative on the B.C. Real Estate Association’s Standard Forms Committee since 1996.

This article was published in the April 2003 issue of BarTalk. © 2003 The Canadian Bar Association. All rights reserved.