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LEGAL FEES FOR BUYING A HOUSE

How much do you pay your lawyer when you buy a house?  Most people would automatically assume it is too much. 

The concern is always that the lawyer does not do very much.  It is true that conveyancing assistants do a large part of the document preparation.  It is however, the lawyer who takes the risk and responsibility for the transaction.  It is also very difficult for clients to see what the lawyer does as most of the transaction happens without the client being present or informed about all of the lawyer's input.

The lawyer is responsible to get the buyer a good title and, when there is a mortgage, give the bank an opinion that the mortgage is a good and valid charge on the property, which will be enforceable.  If there is a problem with the mortgage in the future the bank will look to the lawyer to make it right. That does not mean that the lawyer would be responsible for mortgage payments or a deficiency if foreclosure does not generate enough funds to pay out the debt.

The total legal bill paid to the lawyer will include the fees paid to the lawyer for acting for the buyer and for acting for the bank (the buyer always pays the banks way), and the lawyers disbursements (the cost of registering documents at land titles, tax certificates, searches, etc.) and of course GST.

The fees portion of the bill is for the lawyer, from which the lawyer pays expenses such as staff, lights, power, rent, etc.

Over the last ten years or so the fees portion of the legal bill has not changed significantly.  All of the expenses of the lawyer have increased, as have most disbursements also increased significantly.

Housing prices have increased drastically, which means the amount mortgaged has also increased.  This means that the lawyer has a higher dollar value of risk attached to each transaction.

Banks have also inadvertently added to the amount of work the lawyer and or the lawyer's staff must do.  Banks are trying to centralize their processing of mortgage loans.  This is to make things more efficient for the banks and make things more consistent for the customer.  The result is that the lawyer must spend more time on the average transaction and must deal with bank documents that would not have been seen in a lawyer's office prior to centralization efforts.

The result of increased work and time on each transaction is that a lawyer and staff can complete fewer transactions in the same amount of time.  Technology advances have made the processing faster so it is unclear whether lawyers may be able to complete more transactions, however, the computer costs including software, maintenance and updates are an additional expense for lawyers.

With increased expenses lawyers have been receiving less net income over time for doing real estate transactions.  The cost to clients compared to house price is a much lower percentage than ever before.

It is difficult to say if the current trends in legal fees will continue but it is safe to say that clients are getting a better deal now comparatively than they have ever received in the past.

By Glen D. Cunningham
July 7, 2004