“NO MORE PAPER”—
Practicing Real Estate Law Without Paper
This paper was delivered on October 3, 2008 at the Kingston and the 1000 Islands Legal
Conference sponsored by the County of Frontenac Lawyers Association in Gananoque,
Ontario
Prepared by:
Alan G. Silverstein
Barrister and Solicitor
Director, National Legal Engagements
Emergis, a TELUS company
5090 Explorer Drive, Suite 1000
Mississauga, Ontario
L4W 4X6
Telephone: (905) 238-3712
Email: alan.silverstein@emergis.com
“This paper is intended to provide commentary on new and important legal issues. It is not
intended, and should not be relied upon, to provide legal advice in any particular factual
situation, as individual situations will differ and should be discussed with a lawyer.”
“NO MORE PAPER”-Practicing Real Estate Law Without Paper
ALAN G. SILVERSTEIN1
Fundamental changes have dramatically reshaped the practice of real estate law in Ontario the
last decade. Aggressive competition from several title insurers has virtually eliminated the real
estate bar from refinance transactions. Rush deals and quick closings have become the norm.
Lawyers operating real estate factories churn out work at lowball rates, putting downward
pressure on fees. A “glass ceiling” makes it increasingly difficult for real estate lawyers to
increase fees to a reasonable level, despite concerted efforts by segments of the profession to
reverse that trend2. On the flip side, overhead/operating expenses are constantly spiking
upwards.
Stress, anxiety and aggravation are the inevitable result. Add to the mix professional obligations
and standards of practice that are constantly rising, and the real estate bar in Ontario is more
vulnerable and exposed than ever before.
Another dramatic transformation has been the introduction and evolution of technology in real
estate conveyancing—a long-time holdout for paper-based processes. Weaning Ontario property
titles off paper to an automated format, thereby enabling online searching and remote electronic
registrations, is almost complete3. While the impact of technology on the tried and true has been
dramatic (some would add traumatic), Ontario real estate lawyers have barely scratched the
surface in terms of what can (and should) be done to further automate existing processes and
increase office efficiency—vital survival requirements in today’s highly competitive world.
1
Barrister and Solicitor (Ontario); Certified Specialist (Real Estate Law), Law Society of Upper Canada; Director,
National Legal Engagements, Emergis, a TELUS company. This paper was delivered on October 3, 2008 at the
Kingston and the 1000 Islands Legal Conference sponsored by the County of Frontenac Lawyers Association in
Gananoque, Ontario
2
See lawyersworkinggroup.com/Fees.html where the Suggested Fee Schedule prepared by the Working Group on
Lawyers and Real Estate (Ontario) appears. Both the Ontario Bar Association and the County and District Law
Presidents Association are associated with the Working Group (accessed on August 24, 2008)
3
As of June 30, 2008, 5.29 million titles were automated, representing 95.2% of the estimated provincial parcel
base. See Teranet Q2 2008 Results, at media.corporate-ir.net/media_files/irol/19/198264/ternaet_august0808.pdf ,
accessed on September 2, 2008
No business, industry or profession has been left unscathed by the latest technology of the day.
That includes real estate lawyers. At one time, every deed, mortgage and discharge was
handwritten on parchment using a quill, signed in ink, and sealed in wax with a thumbprint.
Imagine the backlash when typewriters were introduced!
The retreat from strict reliance on original, ink-signed paper documents began decades ago. Fax
machines and their widespread use clearly were a catalyst. Before long, the fax machine was
accepted as an appropriate delivery medium, first by the business community4 and then by the
courts. In 1989 the Ontario Court of Appeal ruled that proper notice had been given to the
holder of a first right of refusal to buy real estate when a competing offer was faxed to them,
although fax machines did not even exist when the right was granted. “Where technological
advances have been made which facilitate communications and expedite the transmission of
documents, we see no reason why they should not be utilized.”5
Ironically, fax machines themselves have become a victim of technology. Once heralded as
leading-edge technology, they are slowly being replaced with more secure delivery methods.
Lamenting for the “good old days” (whatever they may be) won’t make them return. Turning
back the hands of time is not viable, either. In many respects, the only constant today is change.
“TO COPE WITH CHANGE IS TO SURVIVE.
TO BENEFIT FROM CHANGE IS TO SUCCEED”
Change is often the victim of unwarranted criticism, pre-judged by its very existence to be
threatening and harmful. While change can be an intimidating challenge to the traditional way of
doing business, a more objective, open-minded response would examine its potential benefits
rather than arbitrarily dismissing change as detrimental. Can technological change help remedy
4
Example: for many years lenders such as The Toronto-Dominion Bank required that final reports and enclosures in
mortgage transactions be faxed to it, rather than sending original documents by mail or courier.
5
Rolling v. Willann Investments Ltd., (1989), 70 O.R. (2d) 578 (Ontario C.A.). For a list of other cases, see Gregory,
John; Receiving Electronic Messages; Banking and Finance Law Review; 1999-2000; page 473 at 481 to 482.
the shortcomings of the status quo? If so, how? Can technology and automation make the
practice of real estate more efficient—assuming, of course, that it does not marginalize the role
and relevance of a lawyer? If so, in what way? Is technology the problem, or can technology be
the solution?
This paper will focus on technological change and its benefits for the real estate bar across
Ontario from three different perspectives:
a)
Statutory. Electronic documents and transmission of data are becoming increasingly
common. What does the law allow/require in terms of automation?
b)
Regulatory. An alternative to traditional file storage is archiving them in electronic
form. What is the position of the Law Society of Upper Canada on this issue?
c)
Practical. If the reliance of the Ontario real estate bar on paper will decrease, what
features should their replacement (automated programs) include? How similar/
dissimilar are electronic and paper-based transactions? How do mortgage
transactions differ from purchase/sale transactions? And what further changes would
be welcomed?
Overall, the goal of this paper is provide the real estate bar of Ontario with a better understanding
how the status quo can (and should) be automated, to survive and thrive in the electronic era of
real estate.
A)
Statutory: Ontario’s Electronic Commerce Legislation
Laws governing electronic commerce (“e-commerce”) now exist in most provinces6. Except for
Québec, “one striking element to each of the provincial bills is their similarity: it is clear that an
effort has been made to harmonize e-commerce throughout Canada, to promote certainty and
stability in the Internet marketplace. This similarity is not surprising, given that they were based
upon draft bills prepared by the Uniform Law Conference in Canada (the "ULCC")7.”
E-commerce laws only facilitate the voluntary use of electronic information and documents; they
do not mandate their use. As Section 3 of Ontario’s Electronic Commerce Act 8 states: “nothing
in this Act requires a person who uses, provides or accepts information or a document to use,
provide or accept it in an electronic form without the person’s consent”. While written consent is
preferable, consent “may be inferred from a person’s conduct if there are reasonable grounds to
believe that the consent is genuine and is relevant to the information or document9.”
The ECA, which governs most e-commerce in Ontario, contains a list of “Functional
Equivalency Rules” providing legal recognition for electronic documents and information if
specified terms and criteria are met. As a general rule:
6

“Information or a document to which the legislation applies will not be invalid or
unenforceable by reason only of it being in electronic form;

A legal requirement that information or a document be in writing will now be
satisfied by its being in an electronic form that is accessible for subsequent reference;

A legal requirement that a person provide information or a document in writing to
another person will be satisfied by the provision of the information or document in an
electronic form that is: (a) accessible by the other person so as to be usable for
subsequent reference and (b) capable of being retained by the other person;
In Ontario, see the Electronic Commerce Act, 2000, S.O. 2000, Chapter 17
Quebec’s Proposed Information Technology Law, February 1, 2001, Oslers, available at
www.osler.com/resources.aspx?LangType=1033&id=7924 accessed on August 23, 2008
8
Supra, footnote 6
9
Supra, footnote 6
7

A legal requirement that a person provide information or a document in a specified
non-electronic form to another person will be satisfied by the provision of the
information or document in an electronic form that is: (a) organized in substantially
the same way as the specified non-electronic form, (b) accessible by the other person
so as to be usable for subsequent reference, and, (c) capable of being retained by the
other person

A legal requirement that an original document be provided, retained or examined will
be satisfied by the provision, retention or examination of an electronic document if:
(a) there is a reliable assurance as to the integrity of the information contained in the
electronic document from the time the document was first created in its final form,
and, (b) in a case where the original document is to be provided to a person, the
electronic document is accessible so as to be usable for subsequent reference and
retention by the person; (emphasis mine)

A legal requirement that a document be signed will be satisfied by an electronic
signature. However, if the document is on a list of prescribed documents the
requirements may be more stringent;

If the use of electronic information or an electronic document is otherwise permitted,
a legal requirement that one or more copies be provided to the same person at the
same time will be satisfied by the provision of a single version of electronic
information or of an electronic document10.”
Federally, “PIPEDA” (the Personal Information Protection and Electronic Documents Act11)
addresses more than money laundering; it also deals with the use of electronic documents.
Concurrent with the enactment of these e-commerce laws, the federal and provincial evidence
acts were amended to deal with authentication of documents and the “best evidence” rule12.
Codifying the common law rule, the burden of proving authenticity of an electronic document
rests on the person seeking to rely on it13.
10
Fekete, Michael G., Ontario Ushers in New Rules for E-commerce; May 11, 2001; Osler website; available at
www.osler.com/resources.aspx?id=8144 , accessed on August 21, 2008. The highlighted paragraph underscores
how documents converted from paper to an electronic format can be legally validated.
11
S.C. 2000, c. 5
12
For an excellent review of these issues, see Karn, Bernice M., Dealing with Electronic Data, Ontario Bar
Association; March 27, 2006; available at
www.casselsbrock.com/pdf/publications/Karn_DealingWithElectronicData.pdf ; accessed on August 21, 2008
13
See Section 31.1 of the Canada Evidence Act, R.S.C. 1985, c. C-5, and Section 34.1(4) of Ontario’s Evidence Act,
R.S.O. 1990, Chapter E.23
A totally different approach was needed to tackle the best evidence rule. “Over time, this rule
has been narrowed to the point that it essentially means that where a party possesses an original
document, that original document must be produced…Given that documents in the electronic
world are created by data that are input into computers and other devices, then stored, retrieved,
and paper documents created from those data, the common law concept of an original document
does not neatly apply to electronic documents14.” Recognizing this, the evidence acts focus on
the reliability and integrity of the system producing the electronic document15.
For evidentiary purposes, the legal requirement that a document be signed, can be satisfied by an
electronic signature,16 subject to certain conditions on reliability and technological requirements.
While regulations spelling-out these conditions do not yet exist in Ontario, a detailed set of rules
governing electronic signatures has been enacted by the federal government.17
Not all electronic documents are governed by the ECA. Excluded are18:
1) Wills and codicils.
2) Trusts created by wills or codicils.
3) Powers of attorney, if they involve an individual's financial affairs or personal care.
4) Documents, including agreements of purchase and sale, that create or transfer interests in
land and require registration to be effective against third parties.
5) Negotiable instruments.
6) Documents of title (except for contracts for carriage of goods).
7) Documents that are prescribed or belong to a prescribed class
Separate legislation, the Land Registration Reform Act (the “LRRA”) then governs the electronic
registration of transfers and mortgages on title in Ontario19.
14
Karn, footnote 12, page 5 and 6
See Sections 31.2 and 31.3 of the Canada Evidence Act, supra, footnote 13, and Sections 34.1(5), 34.1(5.1), and
34.4(7) of Ontario’s Evidence Act, supra, footnote 13.
16
Section 11(1) of the ECA, supra, footnote 6
17
See Secure Electronic Signature Regulations, S.O.R./2005-30.
18
Section 31 of the ECA, supra, footnote 6
19
R.S.O. 1990, Chapter L.4
15
An old chestnut not to be ignored is the Statute of Frauds Act20, first enacted in England in 1677.
To be enforceable, documents that create or transfer an interest in land must be in writing, signed
by the transferor or mortgagor, and contain certain prescribed terms. How can a transfer or
mortgage created and registered electronically comply with the Statute of Frauds, if the
transferor or mortgagor does not sign the actual document in ink?
Section 21 of the LRRA21 tackles that issue. “Despite section 2 of the Statute of Frauds Act,
section 9 of the Conveyancing and Law of Property Act or a provision in any other statute or any
rule of law, an electronic document that creates, transfers or otherwise disposes of an estate or
interest in land is not required to be in writing or to be signed by the parties and has the same
effect for all purposes as a document that is in writing and is signed by the parties.22”
Another potential conflict involves paper and electronic versions of the same document. Again
the answer appears in the LRRA. When a registered electronic document also exists in paper
form, “the electronic document or a printed copy of the electronic document prevails over the
written form of the document in the event of a conflict”23. Under the LRRA, paper clearly is no
longer paramount.
While e-commerce laws and specific land registration legislation govern the creation and use of
automated documents, what is the position of the Law Society of Upper Canada on the issue of
processing transactions and retaining documents/files in non-paper form?
20
R.S.O. 1990, Chapter S.19
Supra, footnote 19
22
Only transfers and mortgages create, transfer, or dispose of an estate or interest in land. Guarantees do not. So
guarantors in Ontario still must sign an original standalone paper version of the guarantee in ink. See Law Society of
Upper Canada, Practice Guidelines for Electronic Registration of Title Documents, Practice Guideline 5 (Electronic
Closings and Mortgage Transactions), in “Real Estate Practice Guide”, available at
rc.lsuc.on.ca/pdf/realEstatePracticeGuide/realEstatePracticeGuide_complete.pdf , page 104, accessed August 28,
2008
23
Supra, footnote 19, section 22
21
B)
Regulatory: Law Society Rules on Scanning and Retaining Files in Electronic Form
Storing paper-based files is a major cost consideration for lawyers in firms big and small,
regardless of the type of law they practice. Lawyers are looking for an effective, cost-efficient
substitute for the storage of paper files in their original form. Questions demanding answers are:

What must be kept?

For how long?

In what format (their original paper form, or in electronic form?)
The flip side of these questions is: what paper documents can be destroyed? When? And which
paper documents can be replaced by an electronic version?
The Law Society of Upper Canada permits files to be scanned and retained in an electronic
format as an alternative to storing them in paper, provided specified conditions and restrictions
are satisfied. However, the wording is quite generalized, its position is buried in commentary
that focuses more on closed file management, and the full answer must be gleaned from several
different sources.
The following comments appear in Law Society of Upper Canada bulletin “File Retention”:24

Documents to be retained fall into two categories: mandatory (legal and regulatory) and
non-mandatory (to defend against claims of negligence, misconduct or assessment of an
account; to serve the client in the future; and to support an efficient and effective practice
i.e. as precedents).

“THE PURPOSE FOR WHICH THE DOCUMENTS ARE RETAINED WILL
DICTATE THE FORM OR MEDIA IN WHICH THE DOCUMENTS SHALL BE
RETAINED”25
24
available at rc.lsuc.on.ca/pdf/pmg/fileRetention.pdf , accessed on August 19, 2008; and the Knowledge Tree:
Closed Files, and File Destruction, both available at rc.lsuc.on.ca/jsp/kt/loadKnowledgeTreePage.do , accessed on
August 19, 2008. Regrettably this is only a Law Society bulletin, rather than a By-Law, Rule of Professional
Conduct, or Practice Guideline.

Before converting documents to an electronic format, lawyers must consider three issues:
(a) Legal and regulatory requirements. “Lawyers are under legal and regulatory
obligations to retain certain records or documents in a particular format or formats26”.
Examples include the retention of financial records under the Income Tax Act
(Canada), Law Society by-laws governing financial records such as trust account
information27; plus the federal and provincial evidence acts.28
(b) Standards governing the imaging process29
(c) The future availability of documents. “Documents should remain trustworthy,
readable and accessible for applicable retention periods. Documents in electronic
format may require appropriate hardware or software maintained for the duration of
the retention period to ensure accessibility and readability. This is of particular
concern given the speed at which electronic technologies advance, rendering their
predecessors obsolete30”.
Real estate lawyers in Ontario must consult two other documents for specific guidance on record
retention and document destruction--the Law Society’s Practice Guidelines for Electronic
Registration of Title Documents31, and the new Electronic Land Registration Agreement.32
When an electronic document will be registered on title, clients sign an Acknowledgment and
Direction evidencing their intention to be bound by the terms and conditions of that document. It
also authorizes the electronic registration of the document on their behalf. In most cases, a copy
of the electronic form to be submitted for registration, with all fields completed, is attached to the
Acknowledgment and Direction. Since April 7, 2008, the electronic form of transfer must be
electronically signed for completeness by a lawyer using their electronic signature, who is in
25
Supra, footnote 24, page 8
Supra, footnote 24, page 8
27
See By-Law 9, Part V
28
Supra, footnote 24, page 9
29
For example, the Microfilm and Electronic Images Documentary Evidence publication number CAN/CGSB72.11-93 from Canadian General Standards Board
30
Supra, footnote 24, page 9
31
Supra, footnote 22
32
See Form 1, Application for Authorization, Part Two, Electronic Land Registration Agreement, available at
www.gov.on.ca/mgs/graphics/179709.pdf ; accessed on August 30, 2008.
26
good standing with the Law Society of Upper Canada, and who is insured to practice real estate
law.33 The same is true for any electronic document authorized for registration under Power of
Attorney. Other documents (like mortgages) can be signed for completeness by any authorized
user (i.e. a lawyer or staff member) using their electronic signature. Any authorized user can
submit for registration a fully completed and digitally signed electronic form.
Practice Guideline 3 says “signed copies of the Acknowledgment and Direction should be
retained in the lawyer’s file as the written verification of client instructions and authority for
electronic document registration34” (emphasis mine).
That guideline directly conflicts with recent changes introduced by the Ontario government. As
part of its real estate fraud action plan, every user of the electronic search and registration system
is being revalidated by the provincial government. Every individual lawyer who wishes to
register electronic documents must also sign the new Electronic Land Registration Agreement. It
requires that lawyers obtain “evidence of proper authorization” and “explicit consent” before
registering any document electronically. Presumably that authorization and consent must be in
writing, since it must be available for release to the Director of Land Registration “in the event of
any investigation regarding suspected fraudulent or unlawful activity or registration”.35
In addition, “compliance with law statements” replaces the registration of paper copies of
supporting material in the Land Titles Office, establishing the basis for the statement. Commonly
called “law statements”, they “call for an application of legal expertise based on legal judgments,
which must be made by a lawyer.”36 Since April 7, 2008, every electronic transfer contains a
law statement37, along with every electronic document authorized for registration under Power of
Attorney38.
The requirement that a lawyer be “real estate insured” is described below
Supra, footnote 22, page 101
35
Supra, footnote 32, paragraph 7.7
36
Supra, footnote 22, page 106
37
O.Reg 19/99 under the Land Registration Reform Act, Section 5(1)(f.1) and 5(2).
38
O.Reg 19/99, supra, footnote 37, Section 4
33
34
Yet Practice Guideline 6 only says that lawyers “should obtain and retain in their files the
evidence upon which compliance with law statements are based, or alternatively, ensure that
publicly available information to fully support the statements is and remains available.39”
This permissive approach to the retention of critical documents is a serious flaw, especially since
electronic transfers and documents authorized for registration under Power of Attorney now
contain law statements. Documents in the lawyer’s file may be the only source of evidence to
support the content of the law statement. Considering (a) the potential importance of these vital
“back-up” documents in the face of litigation; (b) the potential exposure of a lawyer if a claim is
made regarding those statements; (c) how every electronic transfer now contains a law statement;
and (d) how every electronic document authorized for registration under power of attorney now
contains a law statement, prudent lawyers will treat the word “should” as being “shall”.
The Electronic Land Registration Agreement and the Law Societies Practice Guidelines only
consider “what” must be retained. Neither mandates how—paper or electronic format. With the
Law Society permitting document scanning as an alternative to paper storage, and the ECA
legally recognizing electronic documents converted from paper (if specified criteria are met),
real estate documents and files can be legally retained either in paper or electronic format.
As for “how long”, Ontario lawyers are left to decide that themselves. Unlike provinces like
British Columbia, the Law Society of Upper Canada provides little guidance on suggested
minimum retention periods for various documents and real estate files. The Law Society’s File
Retention bulletin simply acknowledges that the facts to support or defend a real estate claim
may not be discovered for decades after a file is closed. So “title search notes should be kept
indefinitely40”. Their retention is “also mandatory as a component of competence41”. Once
again, left unanswered is the question of how: paper or electronic.
As part of the fight against money-laundering, the Law Society of Upper Canada has enacted
new rules on client identification, verification and record keeping, scheduled to take effect on
39
Supra, footnote 22.
Supra, footnote 24, page 6
41
Supra, footnote 24, page 5
40
October 31, 200842, based on the Model Rule developed by the Federation of Law Societies.
Information and documents under this “know your client” rule are to be retained “for the longer
of (a) the duration of the lawyer and client relationship and for as long as is necessary for the
purpose of providing service to the client, and (b) a period of at least 6 years following
completion of the work for which the lawyer was retained43”. Identification and verification
information can be kept in electronic form, “as long as a paper copy can be readily produced44”.
42
See Part III of Law Society of Upper Canada By-Law 7.1
Section 23(14) of By-Law 7.1 (see footnote 42)
44
Law Society’s new ‘know your client’ requirements enhance public protection, Frequently Asked Questions,
Question 34, available at www.lsuc.on.ca/latest-news/a/hottopics/law-societys-new-know-your-client-requirementsenhance-public-protection/ , accessed on August 31, 2008
43
C)
Practical: Reducing our Dependence on Paper
Despite the changes to real estate practice that followed in technology’s wake, paper remains the
delivery medium of choice for lawyers and lenders in real estate and mortgage transactions.
Draft documents in purchase/sale transactions are sent by fax between lawyers. The same is true
for requisition letters and replies. Signed paper documents are delivered on closing; nothing in
the Document Registration Agreement changes that45. When a mortgage is being processed,
lenders continue to send instructions in paper format to lawyers by courier, mail or fax. Funds
are still often delivered to lawyers in “hard copy” form, while final reports are typically sent to
lenders accompanied by reams of paper. This paper-based system in which the Ontario real
estate bar operates, is a dinosaur languishing in an electronic world.
Two significant problems plague this model.
First, lawyers and lenders alike are drowning in a sea of paper. Each new statutory, regulatory or
lender requirement adds to the paper consumed. Today’s real estate files are fat and bordering
on unmanageable, compared to their svelte predecessors a mere decade ago.
Besides that, processing real estate and mortgage transactions remains labour-intensive. With
the same data manually inputted by different people at different times at different locations, these
transactions are prone to mistakes.
The need to automate the processing of real estate and mortgage transactions is compelling.
What features are lawyers seeking in an automated program for processing a purchase/sale or
mortgage transaction?
45
This most recent version of the Document Registration Agreement adopted by the Joint OBA-LSUC Committee
on Electronic Registration of Title Documents on
March 29, 2004 is accessible on the internet at
rc.lsuc.on.ca/doc/membershipServices/dramarch04.doc

Fully automated from end to end (not merely a process that converts scanned paper
reports into images, or that relies on that most insecure delivery system, the fax machine)

Truly paperless (totally automated, eliminating paper instead of handling it differently, or
generating more paper than in a paper-based system)

Easy to learn and simple to use, with no hardware or software to buy

Accessible any time, real time, from any location where the internet is available

Effective in reducing mistakes, reducing downtime and increasing efficiency, by
minimizing manual inputting of data

Non-invasive, by complementing and integrating with a lawyer’s current workflow

Streamlining and simplifying existing processes by eliminating well-known snags and
bottlenecks

Designed to slash the time needed and the cost involved in processing a transaction

Neutral, having no impact on the choice of a lawyer or the fees they charge

Compatible with electronic registration of documents on title

Fully compliant with all regulatory requirements

Capable of reducing stress and aggravation in a lawyer’s practices

Up-to-date security protection

Validation of lawyer status with the law society (discussed below)

Overall, the tools real estate lawyers need to operate efficiently in an increasingly pricesensitive and competitive world, so they can “stay in the game”
Purchasers and lenders have widely differing views about the importance and function of paper
in a real estate or mortgage transaction. Purchasers want a copy of virtually every document in a
lawyer’s file (including, but not limited to report; transfer; survey; title insurance policy;
direction; authorization; acknowledgment; affidavit; status certificate; and Tarion Warranty
Certificate). While paper will likely remain the accepted way for lawyers to report to purchaser
clients in the future, there is no statutory or regulatory prohibition against them providing the
final report and enclosures in an electronic form (i.e. on a CD or DVD, in pdf format).
Lenders, on the other hand, are primarily focused on the security of the funds advanced. The
supporting documents are less of a concern46. In a mortgage transaction, lenders retain lawyers
to secure the loan with a mortgage registered against a borrower’s property that complies with
the lender’s pre-determined priority status (i.e. first mortgage).47 At the heart of the process is the
lawyer’s final report, where the lawyer provides various required assurances to the lender,
including an opinion about the validity and status of the mortgage. While the specific content of
that report and opinion will vary from lender to lender, the essence remains the same.
A lawyer’s final report to a lender should address the following:
a) The mortgage has been properly prepared and signed
b) The mortgage has been validly registered, and secures the funds advanced by the lender
as a good and valid first mortgage
c) The mortgage is not subject to any prior liens or encumbrances
d) The lawyer has complied with all the lender’s instructions in completing the transaction
e) The lawyer has completed all aspects of the transaction in accordance with applicable
professional standards.
f) The mortgage is fully enforceable both in accordance with its terms and provincial law,
in the event of default in payment or performance
g) The lawyer is in good standing with the law society, carries errors and omissions
insurance, and is “real estate insured”.48
This difference in approach is reflected in the varied wording between an owner’s and a lender’s title insurance
policy. Many exclusions in the standard wording of an owner’s policy do not appear in a lender’s policy, because
those exclusions “rarely go to the heart of a property’s value, and the lender is not usually exposed to 100% of value
in any event. The lender’s exposure is for a percentage only of the property’s value and that percentage gets smaller
all the time, because of loan payments and appreciation of the property”. Troister, What is Title Insurance, Law
Society of Upper Canada program on Title Insurance, May 6, 1997, page 1-7
47
The classic definition of a mortgage is security for the repayment of a debt—“a charge on land as security for the
payment of a debt, with certain remedies for nonpayment” (Real Estate Encyclopedia, Canadian Edition, Ontario
Real Estate Association, 2005, page 428).
48
As of January 1, 2008, all lawyers practicing real estate in Ontario must be “Real Estate Insured” (i.e. carry a new
“fraud endorsement”) in addition to the basic errors & omissions coverage. See Endorsement No. 6, Real Estate
Practice Coverage Surcharge (Modified Innocent Party Coverage for Real Estate Registration Fraud); Lawyers’
Professional Indemnity Company; available at
www.lawpro.ca/insurance/Insurance_Type/lawpro_policy.asp#Endorsement6; accessed on September 1, 2008
46
In a mortgage transaction, the lawyer’s report and opinion are paramount. Paper
enclosures and attachments support that report and opinion, and may provide comfort to a
lender. However, they have no impact on the legal status of the registered document or the
report/opinion rendered. A lawyer’s report and opinion must always stand on its own.
Lenders must be able to rely on the content of that report and opinion, independent of any
paper enclosures or attachments. If a document is not inherently valid as a first mortgage,
no amount of accompanying paperwork will change that.
Lenders are also examining the need for paper from another perspective. Traditionally, they
have dedicated considerable time, staff and resources to examining the lawyer’s final report and
enclosures, re-validating what the lawyer has already stated. The need for this post-closing
review of the lawyer’s work is now being questioned, especially from a cost/benefit perspective.
If no amount of accompanying paperwork will change what the lawyer has said in their report,
why even receive the paper documents?
Embracing this modernist view about the primacy of a lawyer’s final report is only the first stage
in accepting the legality and viability of an electronic mortgage processing program. Two other
criteria must be satisfied to bolster comfort levels about paperless transactions (purchase/sale and
mortgage): assurance that the lawyer retained to complete a transaction carries professional
liability insurance; plus undisputed corroboration of who signed the electronic final report.
Errors and omissions insurance has long been vital for clients, protecting them against the errors,
omissions, or negligent acts of a lawyer in the performance of, or in the failure to perform, their
professional obligations. It takes on added importance in a paperless mortgage transaction, since
the lender is relying strictly on the lawyer’s report and opinion in advancing the mortgage funds.
If a lawyer is negligent in honouring the lender’s mortgage instructions, and the legal status of a
registered mortgage differs from the opinion stated in the final report, the only recourse open to
the lender is to look to the lawyer (and ultimately their liability insurer) for compensation.
Errors and omissions insurance is mandatory for all lawyers in Ontario.49
Accepting an electronic final report in a mortgage transaction without paper enclosures or
attachments, and without a handwritten “ink” signature, magnifies a lender’s need to know who
is signing the report. Lenders also must be certain that the lawyer handling the transaction really
is a lawyer in good standing with the law society, who carries the requisite errors and omissions
insurance, and is “real estate insured”50. Currently there is no benchmark whether, when and
how often, lenders manually check the status of lawyers handling mortgage transactions. Even if
they confirm lawyer status on a regular basis, lenders have no way of verifying if the ink scribble
appearing at the bottom of the report truly belongs to the lawyer retained to process the
transaction. Honesty, good faith and trust are the backbone of the current paper-based system.
Regrettably, that trilogy (without safeguards) exposes lenders and lawyers to real estate fraud.
Electronic signatures—“a notarial signature on steroids”—provides the definitive answer to this
“need to know” dilemma. An electronic signature (often called “digital signature”) has been
defined in PIPEDA, Canada’s Anti-Money Laundering Law, as “a signature that consists of one
or more letters, characters, numbers or other symbols in digital form incorporated in, attached to
or associated with an electronic document51”. So a digital or electronic signature involves
adding an electronic symbol to an electronic document, rather than adding a handwritten “ink”
signature to a paper document.
Electronic signatures are also authoritative signatures, as they vest an electronic document with
the following critical features: data integrity, authentication, confidentiality, non-repudiation, and
protection against fraud.
To facilitate paperless electronic transactions, lawyers would be issued an electronic signature
once their identity and credentials are validated. Their status as a lawyer (carrying professional
liability insurance) would be verified on an ongoing basis as they execute electronic documents
That coverage is available through the Lawyers’ Professional Indemnity Company, a wholly-owned subsidiary of
the Law Society of Upper Canada.
50
See footnote 48
51
Supra, footnote 11, section 31(1)
49
using their electronic signature. “Validation of the digital signature by the message recipient
confirms that the received document and the sent document are identical (data integrity)52”. By
verifying the identity of the lawyer who signed a report (authentication), the electronic signature
provides an irrefutable and irrevocable link between the lawyer and that electronic document, as
if they had executed the paper report in ink53. With an electronic signature, lawyers in
purchase/sale transactions are assured that the solicitor acting on the other side is entitled to
practice real estate law. With an electronic signature, lenders in mortgage transactions are
assured that the lawyer acting for it (and receiving mortgage funds) is not a rogue—a suspended
lawyer, a disbarred lawyer, or a person masquerading as a lawyer.
Besides protecting an electronic document from alterations, an electronic signature guarantees
confidentiality, since an electronic document signed with an electronic signature can only be
accessed and read by an authorized, intended recipient54.
Validation of the electronic signature also “prevents the sender from denying knowledge of the
document (non-repudiation).55” Compared to the current paper process, electronic signatures
provide lenders with enhanced protection against real estate fraud, while eliminating any
uncertainty about the content, authenticity or identity of the lawyer signing an electronic report.
This triumvirate of electronic final reports, errors and omissions insurance and electronic
signatures makes the automated processing of automated real estate transactions in general, and
paperless mortgage transactions in particular, viable. In a nutshell, a lawyer says to the lender in
52
Digital Signatures, Notarius website; available at www.notarius.com/en/digital_center.html ; accessed on
September 3, 2008
53
Quebec recognizes that a digital signature constitutes a notary’s official electronic signature. According to
Section 2827 of the Civil Code of Québec (1991, c. 64, s. 2827; 2001, c. 32, s. 77), "the signature is the affixing by a
person, to a writing, of his name or the distinctive mark which he regularly uses to signify his intention." (emphasis
mine). Section 22 of the Quebec Notaries Act says that a notary's signature "may be affixed by any means suitable
to the medium". The Quebec legislation that establishes a legal framework for information technology (R.S.Q.
2001, c. 32), in force since November 2001, also affirms the legal character of a virtual transaction. See Digital
Signatures, Notarius website; footnote 52
54
With the introduction of “public key cryptography”, electronic “keys” come in a matched pair of "public" and
"private" keys. Data is encrypted using the public key and can only be decrypted and read by the holder of the
matching private key. See “Public Key Infrastructure”, Teranet website,
www.teraview.ca/ereg/ereg_security.html accessed on September 1, 2008. Even when a third party intercepts the
electronic document, they will be unable to decrypt it if they lack the appropriate private key. This eliminates the
need for the sender and recipient to exchange any "secret" data in addition to the electronic document itself
55
Supra, footnote 52
the final report “I have fully complied with your mortgage instructions. In my opinion, you have
a good, valid and enforceable first mortgage”. In addition, the lawyer carries professional
liability insurance. Finally, the lawyer’s identification is validated when the electronic signature
is issued, and their status with the law society is re-verified at several points in the transaction. If
the mortgage is not valid and enforceable as anticipated, the requisite criteria exist to file a claim
against the lawyer and their insurer for professional negligence, despite the absence of paper
documents. Remember: if the content of the lawyer’s report is wrong, no amount of paper filed
with the lender will ever change that.
The most serious shortcoming in the current system is the absence of a Certification Authority
(also known as a Certificate Authority or CA) for lawyers in most provinces. When a document
is signed electronically, the identity and credentials of the person affixing that signature must be
validated, so users have absolute confidence on its authenticity and content as if it were printed
on paper and signed in ink. Who should do that? A “trusted third party”, the CA.
A Certification Authority is a third party trusted to associate a public and private
(electronic) key pair with a particular individual or entity. It identifies the individual
or entity which is to receive a key pair; issues keys; revokes keys when a private key
may have been lost, stolen or otherwise made public; and provides notice as to those
key pairs which have been revoked. It is possible that an individual, instead of a
Certification Authority, may generate his or her own keys. A public/private key pair
is a set of two numbers. The electronic document or record which links the key pair
to an individual or entity is a digital certificate issued by a Certification Authority.
The digital certificate, which has been digitally signed by the Certification
Authority, contains the public key and serves as evidence that the individual
identified in the certificate holds the corresponding private key56.
Regulators have established CAs in only 2 provinces—Québec and British Columba.
In Ontario, the Law Society of Upper Canada does not own or operate a Certification Authority.
Instead, Teranet,57 a publicly-traded income trust, has established its own CA through its Portas
56
Creating a Central Certifying Authority, prepared by the National PKI Group for the National Technology
Committee of the Federation of Law Societies of Canada, February 2000, available at
www.flsc.ca/en/pdf/pki_reportFeb2000.pdf page 13
57
“Teranet Income Fund is an unincorporated, open-ended trust established under the laws of Ontario by way of a
declaration of trust.” Investor Relations, Teranet website, available at http://phx.corporate-
technology58. Everyone conducting a remote title search or registering a document electronically
must have their credentials validated by Portas. The Law Society does little more than feed data
about lawyer status to Teranet in its capacity as CA on an ongoing basis. When lawyers apply to
Teranet, it uses the Law Society’s database to verify their status. The Law Society also provides
Teranet with timely updates on lawyer status (a) so it can register new lawyers and deny access
to retired, suspended or disbarred lawyers,59 and (b) ensure that only lawyers in good standing
can access the electronic registration system in order to register transfers and documents
authorized for registration under Power of Attorney60.
The absence of Canadian law societies as Certification Authorities is unfortunate, since they
recognized the value and importance of a national CA not so long ago. In February 2000, the
Federation of Law Societies of Canada passed a resolution supporting the formation of a separate
entity to establish and manage a nationally co-ordinated certification authority for lawyers.
Although that resolution was eventually approved by every law society,61 the matter has
remained dormant since 2000, for reasons never publicly disclosed.
Why did the Federation believe that law societies were the appropriate organizations to establish
a national Certification Authority for lawyers? Law Societies are “trusted entities whose central
responsibility is already that of certifying the identity and status of lawyers62” “Through
membership in one of the law societies lawyers are identified and given the status required to
practice law. Each of the law societies has developed systems to certify these attributes as
required in the public interest. Because electronic business can eliminate the need for face-toir.net/phoenix.zhtml?c=198264&p=irol-homeProfile , accessed on September 5, 2008. Teranet also provides
exclusive access to the land titles system for electronic searches and registrations.
58
Portas Technology, Teranet website, available at www.teranet.ca/products/portas.html accessed on September 4,
2008
59
Law Society of Upper Canada, e-reg Procedures and Practice Standards, August 2000, page 9, available at
rc.lsuc.on.ca/pdf/eReg/e-reg_p_and_pstds_rep1.pdf , accessed on September 4, 2008
60
Since April 7, 2008, the electronic form of transfer must be electronically signed for completeness by a lawyer
using their electronic signature, who is in good standing with the Law Society of Upper Canada, who is insured to
practice real estate law. The same is true for documents authorized for registration under Power of Attorney. Since
then, lawyer status is verified every time an electronic transfer, or a document authorized for registration under
Power of Attorney, is electronically signed for completeness prior to registration
61
Law Society of Upper Canada, Technology Task Force Report to Convocation, March 23, 2000, page 4, available
at www.lsuc.on.ca/media/techtaskfrcerpt.PDF , accessed on September 4, 2008. The Law Society of Upper Canada
approved the resolution on June 23, 2000; see Minutes of Convocation, June 23, 2000, page 5, available at
www.lsuc.on.ca/media/000623drm.pdf ; accessed on September 4, 2008
62
Supra, footnote 56, page 5
face interactions (including to transact commercially), “electronic trusted agents” are taking the
place of traditional systems to verify the identity, and where necessary, the status of the parties.
Status certification has been the business of law societies for more than two centuries63.”
According to the Federation report, creation of a Certification Authority was not a technology
issue, but ‘a function related to the mandate of law societies in Canada,’ for 4 reasons:

Law societies already issue and police lawyer credentials, and are in the best position to
validate identity and verify status. That should continue in an electronic world

Independence. ‘In the absence of the law societies creating a national infrastructure, the
private sector will, and this, inevitably, will result in a loss of independence’

“Certifying authorities must be trustworthy; law societies are endowed with that public
trust by legislation and should maintain that trust relationship in the online environment.”

The public interest. As e-commerce gains wider public acceptance, law societies must
“facilitate clients doing business on line with each other, and with businesses, and
governments. In doing so, they should be able to access the services of their counsel
securely and with trust64”.
At the present time, there are no indications that any law society in Canada is even toying with
the idea of establishing a Certification Authority.
With the recognition of the primacy of the final report, and despite the absence of
Certification Authorities across Canada, paperless mortgage transactions have become a
reality today in Ontario65. Assyst Real Estate from Emergis, a TELUS company, is a process
that enables mortgage transactions to be processed electronically, from end to end, without any
paper. Disclosure: I am the Director, National Legal Engagements, for Emergis. Paperless
mortgage transactions are also available from LawyerDoneDeal, its product being VIP—Virtual
Intermediary Program. Four institutional lenders currently participate in Assyst Real Estate in
63
Supra, footnote 56, page 2
Supra, footnote 56, page 11
65
See Marron, Bye-Bye Fax Machine; Canadian Lawyer magazine; March 2008; available at
www.emergis.com/Solutions/finance/real_estate/docs/en/Canadian_Lawyer_Article_March_2008.pdf , accessed on
September 1, 2008
64
Quebec—RBC Royal Bank, Group Desjardins, National Bank of Canada, and Laurentian Bank.
RBC Royal Bank also processes mortgage transactions electronically with Assyst Real Estate in
Ontario and British Columbia. LawyerDoneDeal’s VIP program has one lender on board—
Xceed Mortgage Corporation. Over 632,000 mortgage transactions have been processed using
Assyst Real Estate by over 2,400 lawyers and notaries across Canada66. By their actions, these
lawyers and lenders have recognized the importance and value in weaning themselves off paper,
without sacrificing legality, compromising quality or assuming needless risks.
With the statutory67 and regulatory requirements in place, paperless, electronic real estate
transactions—purchase/sale and mortgage— can finally be brought into the mainstream. What’s
needed now is a change in thinking—a change in mindset—about the role and relevance of
paper. Lawyers (and lenders in electronic mortgage transactions) must recognize that what
ultimately matters is the message, not the medium. Paper is only a medium, a method of
delivering the message. Paper is not the message. In a mortgage transaction, the content of a
lawyer’s report and opinion is the message. Paper enclosures and attachments have no greater
strength than papier-mâché if the lawyer bungled the job and provided an inaccurate final report
and opinion. While paper has been the traditional way to deliver that message, other media can
do so faster, cheaper and more securely.
Today, the greatest impediment to widespread acceptance of automated purchase/sale and
mortgage transactions is cerebral. It’s lawyers and lenders limited by conventional thinking,
clinging to the antiquated belief that mortgage transactions are only valid, legal and effective if a
final report is signed in ink and cloaked with paper. By viewing paper as a security blanket,
these lenders and lawyers equate the medium and the message.
That old proverb “you can’t make a silk purse from a sow’s ear” applies equally to real estate
lawyers. No amount of paper accompanying a final mortgage report can trump what a lawyer
says in it. No amount of paper accompanying a final report can supersede a lawyer’s opinion
66
Numbers for LawyerDoneDeal and its VIP program are not available, as it is a private company.
For example, the legal requirement that a document be in writing is satisfied by a document in electronic form, if
it is accessible “so as to be usable for subsequent reference.” See s. 5 of the ECA, supra, footnote 6. In addition,
the legal requirement that a document be signed, can be satisfied by an electronic signature (the ECA, section 11).
67
about the validity and enforceability of a registered mortgage. If a document is not inherently
valid as a first mortgage, no amount of paper accompanying a final report will ever change that.
The secret to success in the electronic era of real estate is simple. Lawyers must learn to
distinguish the message from the medium. Lawyers must recognize how, in electronic mortgage
transactions, the lawyer’s report and opinion are what really counts to the lender, not the paper
attachments or enclosures. Lawyers who adhere to the status quo inevitably will lose ground, if
only by failing to keep pace. Lawyers who recognize the primacy of the message over the
medium will welcome technology and change for being a solution, not the problem. Success for
Ontario real estate lawyers in the electronic era of real estate will depend more on the way we
think, than any other factor.
In recent years, many other professions (especially in the health care field) with sensitive client
data have securely automated their manual paper processes. They have adopted a new mindset, a
new way of viewing paper. The time has come for the real estate bar in Ontario to follow suit.