The lawyers’ Rules of Professional Conduct (lawyers’ Rules) outline circumstances in which a lawyer must recommend or require the client to obtain independent legal advice. While the lawyers’ Rules summarize the situations that require independent legal advice, the necessity of independent legal advice will always be a situation-specific inquiry since it is important to consider all the surrounding circumstances in relation to one another. The case law identifies two types of independent legal advice (Connell v. Connell, 2011 ONSC 4868; MacKay v. Bank of Nova Scotia, 1994 CanLII 7328 (ON SC); Dyck v. Boshold, 2009 CanLII 65813 (ON SC)): (1) advice as to understanding and voluntariness; and (2) advice as to the merits of a transaction. What this means is that whether or not someone requires independent legal advice will depend on two principal questions: whether they understand what is proposed to them and whether they are free to decide according to their own will.
Refinancing Home Loan
In a real estate context, for example, it is not uncommon to obtain independent legal advice in relation to the mortgage documents when individuals refinance their existing home loan. The necessity for such advice will depend on the particular facts and circumstances of a given case, such as, but not limited to:
- business experience
- financial position
- relationship with a lender
- what part an individual played in the negotiations for the loan
- awareness of the terms and conditions of the loan agreement
- direct benefit to a borrower
- transaction being clearly contrary to the best interests of an individual or placing a substantial portion of his/her net worth at risk in return for little or no benefit, etc.
Payment of Proceeds After Closing
If two or more individuals are selling a property, prior to closing Mullun Law requires them to confirm in writing how the net sale proceeds are to be payable, e.g. if they wish separate cheques to each vendor. Without instructions, the vendors will be provided with one certified cheque for the entire net sale proceeds payable to all registered vendors/owners. Should the vendors prefer separate cheques to each vendor, they should consider obtaining independent legal advice before directing Mullun Law in writing as to how such funds are to be divided.
If ownership of the sold property is in only one spouse’s name but the property has been a matrimonial home, the other spouse (who is not a registered owner) shall not only sign a consent for the sale completion but also sign a direction that the net sale proceeds are to be payable to the spouse who is the registered owner. In such an event, Mullun recommends that the consenting spouse obtain independent legal advice prior to signing a direction; otherwise, all net sale proceeds will be paid to both spouses even though one spouse is the registered owner. Note: this rule only applies to a property that is a matrimonial home.
The author, Elmira Chimirova, is a real estate lawyer with Mullun Law. Do not hesitate to contact her if you have any legal questions. Elmira can be reached at Elmira@mullun.com or (800) 878-1630 ext. 102.