Introduction

The expansion of title insurance in BC is of interest to consumers and those who work with real estate because the insurance relates to other forms of consumer protection and because it is one of many factors that could fundamentally alter how land resources and transactions are managed in the current real estate workplace and marketplace. This paper does not predict the future or attack the status quo and does not provide an indepth analysis of title insurance costs and protection. It lays out issues and questions for debate, considers possible future scenarios and suggests that those active in the current system should consider their arguments for or against change not just in terms of self interest, but in terms of the public good which could relate to enhanced services, protecting consumers from fraud, negligence and unnecessary costs or to the protection of land resources and market and administrative efficiencies.

What Is Title Insurance?

For a one-time premium, title insurance provides coverage for lenders, purchasers or owners that could experience a loss as a result of acquiring property or interests in property with a defective title. A defect would generally be the existence of an interest in the land held by another party that was unknown at the time of the transaction despite efforts to identify them because of fraud, forgery or errors by public bodies. In other words, it insures against losses sustained due to the condition of title being other than as registered.

The types of defects covered are described below. Non-title matters may also be covered. Lenders negotiate a set policy with the title insurer. This policy applies when, as described below, consumers opt for having that coverage instead of a survey. Owner policies, available to consumers that request them, are also generally set, but owners can request additional coverage for different conditions. In terms of general points, title insurance will cover the policy holder for the costs and legal expenses of defending a claim against title and will ensure the lender has a valid and enforceable charge on title. Policies also protect assignees of a mortgage (e.g. CMHC) and the policy holder's heirs for as long as they hold title.

The development of title insurance, a $7 billion primarily American phenomenon, occurred over a period of 100 years. Early legal judgments concluded there were no remedies for litigants suffering loss as a result of title defects. Strong growth began in the 1960s because of factors such as the growth of trading in mortgage securities. Traders liked the fact they could be compensated if defects were found in the titles of land secured by the mortgage traded.

Title Insurance in BC

Since the 1980s title insurance has been purchased in BC by some lenders, purchasers and owners on commercial land transactions where solicitors often feel obligated to consider if title insurance would benefit clients and result in smoother closings. The issue now is focused on its expansion into residential properties. Title insurers first issued policies for the benefit of lenders in secondary financing situations where no property transfers are involved. They are now expanding with policies for transactions where land transfers are involved. Lenders involved to date include Canada Trust and the Surrey Metro Savings and Credit Union. First American, Chicago and Stewart Title Insurance Companies are licensed in BC. First American is the most active. This paper does not focus on specific insurers.

Many title insurance opponents argue that it is not necessary in BC. Losses due to title defects are relatively rare. In general, land registry systems in the United States or parts of Ontario only offer a title. Defects are more likely and harder to detect because it is difficult to centrally register, manage and uncover information on interests in land. Complex historical searches are often needed. In jurisdictions that use Torrens or modified Torrens systems (BC), legislation like the BC Land Titles Act provides a state guarantee of title and simple state operated mechanisms to record and transfer title and register interests related to that title such as mortgages or covenants. Interests that are not registered are not effective against third parties so there is an incentive for interests to be registered. The current certificate of title is conclusive evidence of the state of a registered owner's title and it is generally not necessary to do an historical title search. It is an indefeasible title unless exceptions such as fraud apply. Modified Torrens systems include more exceptions. Even with exceptions the certificate may be the root of an indefeasible title in the hands of a bona fide purchaser for value (not aware of defects) notwithstanding defects in the previous owner's title. There is a statutory assurance fund to cover errors or the wrongdoing of system officials or third party fraud (not negligence).

Title insurers are first trying to convince lenders of the benefits of policies protecting lenders. They will try to convince lawyers, notaries and perhaps realtors and others of the benefits of lender or owner policies and to distribute and promote policies for owners and purchasers. If that fails they may try to introduce American-style escrow agents into the market to handle conveyances and distribute consumer policies. In the USA escrow agents may be associated with title insurance companies or realtors. Title insurers likely can make money on operations in BC. Few defects should result in low premiums. Title insurance companies may pay out less on premiums in comparison to casualty insurers but their administrative and delivery costs are higher because of involvement with land transaction processes. Costs can be recovered over the longer term and system costs are reduced because they draw on large American systems.

The Consumer Interest

Consumers want to buy property at reasonable market prices and they want that property to have a certain and secure title. They want to ensure that in the process of owning and purchasing real property that they are protected from factors that could threaten this certainty and security. Governments and professional groups have devised licensing, land registry, professional liability insurance and bonding requirements and other legal and non-legal provisions and processes to protect these consumer interests. The consumer wants these protections to be appropriate given consumer needs, effective and available at reasonable cost. In general, they don't care who does a task for them provided it is done competently and their is some measure of protection if it is not done competently. They also need information to help find good services.

In terms of cost, lenders market mortgage and title insurance packages for a few hundred dollars. This charge assumes there is no survey and no legal advice to the borrower. The cost of title insurance providing protection for defects that a survey would likely uncover is generally less than the cost of the survey. Lenders feel it gives them more protection than a borrower's declaration. A lender's title insurance policy, which protects lenders only is set around $200 and for $50 more an owner can get similar coverage. The consumer pays for the cost of the lender's policy, but this saves money because it avoids the need for a survey and legal representation. With conveyances lenders may offer packages for a set price (e.g. $550) which includes title insurance for lenders or owners and legal fees (if select lawyers used). Third party costs (e.g. surveyors) would not be covered. Some owner policies may involve specific circumstances such as a known encroachment that the insurer covers for a price relating to the risk.

The costs to consumers of statutory or professional liability insurance protections are difficult to assess because they are paid through general taxation, administration fees or professional fees. Consumers are not assessed portions of the expenses paid for maintaining these programs. Consumers pay the professional his invoiced charges and as part of the service they get certain protections. Nevertheless, consumers and taxpayers and the economy generally pay a price for these protective mechanisms. These expenses are a cost of doing business and thus can be part of the price structure.

With respect to the coverage a title insured consumer would receive, the policy would generally cover defects (and costs): resulting in un-marketability of title; resulting from municipal zoning or other by-law infractions; revealed by an up-to-date survey (lender not owner policies); caused by fraud, forgery or errors by public bodies or third parties (e.g. lawyers); resulting from there being undisclosed or missing heirs; resulting from the errors or omissions made by the consumer's solicitor or third parties on which the solicitor relies on for information; resulting from outstanding taxes, strata fees, strata assessments, statutory leans or bylaw infractions (with refinancings searches would be required and chargeed to consumers - with purchases lawyer would take care of this); that adversely affect rightful claims to property and that a lawyer would not be liable for because they arise no matter how carefully a solicitor works; revealed because of surveys (e.g. encroachment) and that may still be underwritten for premiums relating to the risks; arising between initial searches and registration (survey defects if no survey, or title defects e.g. builders liens).

Lawyers argue title insurance only covers title-related losses and does not replace the role of independent solicitors whose services are all regulated by courts and the Law Society, insured, broad based and extend beyond title defects. The list above illustrates that more than title defects are covered by most title insurance policies. Clearly there are areas of duplicated coverage. For example, negligence by lawyers would often be covered by title insurance policies and also by the lawyer's liability insurance. It would not likely cover a consumer's or lender's loss caused by a realtor or appraiser misrepresenting the value of a property because that would not directly relate to a title defect, but it may cover a case of loss where a realtor, in his capacity as a realtor, gives an opinion on title or the survey status of a property and that opinion is reasonably relied on. The liability insurance carried by realtors would also likely cover this latter scenario. The potential for title insurers to increase their already relatively broad coverages exists.

Title insurers call title insurance no fault insurance, but technically policy holders must fulfill certain responsibilities or they will be denied coverage. For example, transactions must comply with consumer protection standards.

In summary, it would appear that title insurance policies can be obtained at relatively low cost and without substantially altering closing costs. Whether there are cost savings or how cost savings relate to protection are issues that require more analysis than is possible here. Excessive, overlapping or duplicated functions and protections and related costs are not in the consumer's interest. This may mean the same function is performed twice during the same transaction or just that there is competition between different groups to perform a task or provide a service or means of protection. This is an important distinction. In general, competition is good, provided everyone is competent. Competition can benefit consumers by forcing prices down. Unnecessary duplication is usually not desirable because costs are added with no added benefit. Perhaps one policy could cover all the different functions and risks through the entire transaction process or at least all those relating to the title. It would be useful to have a better understanding of the costs and real benefits of statutory and professional forms of protection and their relationship to other forms of protection.

The Real Estate Workplace

The second reason title insurance is important is that it illustrates how new technology, systems and services can change the current real estate workplace comprised of public and private interests with their respective functions. Together they try to ensure that land is managed effectively and cost efficiently. This can involve realtors, lawyers, surveyors, developers, appraisers, planners, title search companies, land titles offices, tax assessors, auctioneers, financial planners, mortgage brokers, financial institutions, securities dealers, environmental groups and agencies, home inspectors, accountants, mobile home dealers, property managers. Title insurers now join the fold.

In some cases there are overlapping and duplicated functions and systems of protection. This may mean the same function is performed twice during the same transaction or just that there is competition between different groups. This is an important distinction. In general, competition is good, provided everyone is competent. Unnecessary duplication is usually not desirable if costs added are substantial and there is no added benefit. For example,realtors and lawyers take a role in ensuring that contracts of purchase and sale are properly drafted and enforceable. Realtors, appraisers and government assessment officers may all have opinons on determining the value or sale price of a property. Many groups or workers are involved in giving consumers advice about interest rates or investment quality. There are other examples.

The system where these groups are viewed by government or consumers as distinct entities with clearly defined individual functions could change in an age where there is instantaneous transmission of information and documents, increased competition for functions and more mobile workers that have knowledge and skills that are transferable to other sectors. The traditional roles of professions could change if it becomes more difficult to distinguish functions and justify, in terms of consumer protection, one group having the exclusive right to perform certain functions. The lines between public and private groups or different professions, in terms of functions or statutory protections, could blur or disappear.

In addition to surveyors and lawyers, all professions that deal with land can be changed by title insurance or other changes. The current BC way is not the only way. In many American states attorneys are not involved in residential real estate practice. Where they are active, attorneys would likely have a smaller share of real estate practice without the help of bar-related title insurance funds. In other states, attorneys compete with other groups. In some areas of the USA realtors are involved with conveyancing.

In short, there are many ways to achieve objectives relating to markets, administration, land protection and consumer service and protection. Things always change. Title insurance is just one factor encouraging a review of workplace functions. With real estate agents there are initiatives to develop one licence systems or change the definition of agent to remove references to salespeople being "employees" of agents. Some people argue that the latter is needed to clarify that salespersons can act as independent contractors. The real estate brokerage industry has made changes in the area of agency with the introduction of assumed buyer agency systems. These initiatives also could result in various professions and governments reviewing workplace functions.

The general statutory and common law rules in Canada are that economic functions and the offering of goods and services should occur in free markets unless monopolies can be justified in the public interest. Canada is committed domestically and internationally to free markets. This means an occupation's right to exclusive functions must be justified. Like old monopoly companies (e.g. telecommunications) that have had to learn how to compete, certain professions may have to adapt to change and become more competitive. Groups like the Law Society, Canadian Bar Association or real estate brokerage organizations are or should be trying to determine what their future role may have to be in helping their members compete. Some regulated professional groups are expected to put consumer interests first. They must consider how different arguments relate and the cumulative effect of changes to government or industry policy. Rationales for different changes should be consistent.

Clearly surveyors could be seriously impacted by the introduction of title insurance if more consumers opt for title insurance instead of surveys. Lawyers could also see some of their functions change.

Realtors are involved in many elements of the transaction process and many of their functions can be impacted by and take advantage of technological, software and system changes. Some of these changes are involved with title insurance and others are simply illustrated by the title insurance issue. Sections 1 and 3 of the Real Estate Act says agents and salespersons can exclusively (unless exceptions apply) : help (for a fee) others acquire or dispose of real estate or negotiate loans secured by real estate; solicit for listing real estate for sale or lease; solicit or procure publication of printed advertisements or circulars concerning real estate transaction. Codes of Ethics says realtors have a duty to: provide accurate valuations; present all offers; protect client interests; avoid situations where clients must pay two commissions; remove subjects; provide adequate information about properties; not commit purchasers beyond their financial capabilities; draft enforceable contracts; handle listings and sales; not give opinions unless experience warrants it; protect consumers from fraud, misrepresentations and unethical practices; not represent parties with divergent interests; refer customers to other licensees or professions if they are not competent. In general, realtors show houses, explain legal forms of offer, help find properties and prices of comparable properties, give advice on the amount of offers, help with financing and help find house inspectors and other services.

With respect to the title insurance process, loans officers request insurance coverage by sending the application electronically to the insurer which provides electronic confirmation of coverage provided mortgages are properly signed and witnessed. Lenders ask borrowers or purchasers to get a survey or a title insurance policy for lenders which replaces the solicitor's letter of opinion on title. Even before title insurance some lenders had stopped requiring that surveys be done before funds were advanced and relied on a borrower's declaration that no improvement was made to the land since the last survey. The borrower then meets with a loans officer who explains the nature of the mortgage and the consequences of default and asks the borrower to acknowledge in writing that he declined to have independent legal representation even though the lender recommended it. Lawyers argue that despite written acknowledgments consumers may still think lawyers are representing them if they don't highlight concerns when they are act as officers. If a borrower wants more information they are referred to independent lawyers.

Next the loan application is processed by the lender who enters title and mortgage particulars into a computer database licensed to them by the insurer. Lenders explain the mortgage and the consequences of default. Lawyers argue that lawyers should, at least in many cases, advise consumers about the legal consequences of signing a mortgage document. Others argue that there are few cases where legal advice is actually needed. The insurer and lender conduct a limited review of title which often is restricted to confirming that the borrower is the owner.

An "officer" under the Land Titles Act (usually a lawyer or notary) identifies the borrower, determines his legal capacity and the lack of undue influence on him and then witnesses document execution. Lawyers do not provide legal advice when they act as officers and the BC Law Society asks them to clearly advise borrowers that the lawyer is only acting as an "officer" and not as a lawyer that is protecting the borrower's interest. The lawyer's role as as legal advisers is reduced with title insured secondary financings. Executed mortgage documents are taken to the Land Titles Office for registration by the lender or insurer and they report back. Borrrowers receive loan funds within minutes of the mortgage signing and prior to registration because title insurance covers policy holders against defects registered on title between the time of the initial search signing of the mortgage and registration at the Land Titles Office. Lawyers are not able to take the risk of an intervening registration and allow lenders to instantly fund loans. In reality, BC lawyers will now often pay out on acceptance of the registration.

There are concerns that the BC land registry could become less reliable and cost more for conveyancing and mortgage preparation if lawyers are less involved and not reviewing, pruning and resolving problems, errors and old redundant charges as they do now and insurers just insure around obsolete charges, old mortgages, encroachments and title defects if they regard them as acceptable risks. Title insurers argue they just move processes ahead and make changes, like discharging old mortgages, later rather than allowing the process to slow down the transaction. Meanwhile they assess and cover risks. As noted below, however, it is the interests of title insurers to keep the system working well because their risks are minimized.

How Title Insurance and other Changes May Impact the Real Estate Workplace

Any new technology, software or system that facilitates the electronic handling of information, documents and transactions can impact who does what in the real estate workplace and therefore market and administrative efficiencies and protection for consumers and land resources. Title insurance and accompanying software and systems are worth looking at because of the direct impacts they have, but also because they illustrate how a particular change can have foreseeable and unforeseeable consequences.

Lenders like the document software and communication software packages licensed to them by title insurers. They allow their employees to prepare and transfer mortgages and information to different parties at low cost. Borrowers and lenders can save money. Land registry systems are deficient in parts of the USA so title insurers devote significant resources to gathering, creating, maintaining and guarding title information. These databases are available to those issuing policies for insurers, government and others. Most of these functions are performed effectively in Canada by government and professional groups, but there may be elements of title insurance systems which can contribute to the Canadian system or at least introduce competitive elements. Lawyers that may get involved with promoting owner and purchase policies for title insurers won't likely get software packages, but they will get special phone numbers and perhaps internet services to help consumers and insurers execute the policies.

Financial institutions have long pressured lawyers to streamline real estate deals. Events may force them to do that. Following the lead of American bar-related title insurance packages which evolved to compete with title insurers, the Law Society in Ontario and its insurers have announced Title Plus, a voluntary product available only through Law Society members, to provide lenders and purchasers on real estate conveyances with coverage for both title defects and negligence on the part of members.

In addition to this insurance coverage, the plan will reduce the likelihood of lawyers making mistakes that result in consumer loss and reduce claims against lawyers' liability insurance policies. It will do this by providing lawyers with services such as software checklists which walk the solicitor through the searches and other steps in a transaction where errors can occur. The Law Society's liability insurer will only issue the policy if lawyers have completed the checklist and clients have signed a standard retainer letter developed by the liability insurer. Checklist completion will be communicated electronically to the liability insurer. The BC Law Society has authorized a committee to examine checklists and conveyancing technologies and take other measures that would assist lawyers, but there are no plans to develop a BC Title Plus. Standard undertakings, notes to adjustments, retainer letters and guidelines setting out practice standards are possible.

Software and systems can guide one through a process to ensure set steps are taken or guide a lawyer or other worker through the actual performance of a specific tasks such as drafting a contract. The development of Title Plus or similar software packages and systems can reduce the chances of mistakes and more clearly delineate the worker's function so parties can focus attention on where the judgment of trained and competent professionals of different types is essential for consumer protection and where the tasks are relatively routine and mechanical and can be performed by various players or electronic means. The process can be demystified.

Similar products, depending on availability, can make it easier for others to follow set processes and to perform tasks such as drafting good contracts. No Law Society, title insurer or other group appears to currently be going beyond the types of software and systems discussed above, but they probably will eventually. It would, for example, be a small step for such software to include transaction documents other than those mentioned above. If the process of preparing all these documents were made more simple, as is the case with Title Plus and other software packages, then it could also become easier for others to take the materials and prepare documents. For example, lawyers have exclusive rights to practice law and that covers the drafting of contracts, but realtors also have a stated ethical duty to draft enforceable contracts of purchase and sale. Lawyers review and in some cases modify these contracts.

In addition to influencing how lists of tasks are follows and changing how specific tasks are done (e.g. contracts drafted) there is the issue of how contracts or other documents are easily communicated to others. If a contract can be instantaneously passed to a lawyer over a phone line would realtors be relied on less by consumers to draft a contract? Title insurers have argued lawyers should not be concerned about not being involved in mortgage transactions in the future (if legislation changes) because they still must advise consumers on contracts. If lawyers were to be less involved with mortgages will they insist that no one else be involved in drafting contracts of purchase and sale? On the other hand new software, in some cases developed by lawyers, could enhance the ability of realtors and others to draft good contracts. It could help consumers do more themselves. In Quebec 40% of homes are sold by owners.

Another illustration or example of where similar changes to checklists, performance of tasks and communication information, not necessarily directly relating to title insurance, could modify the role of real estate agents concerns realtors' supposedly exclusive right to "solicit for listing real estate for sale or lease or solicit or procure publication of printed advertisements or circulars concerning real estate transactions". The industry has accepted that this right does not extend to advertising, marketing or information services and other methods of selling property such as newspapers, auctions or the Internet, but the distinctions are arguably becoming more difficult to delineate. The latter can involve agreements for remuneration under which someone helps to promote and advertise a product so it sells. They are attempts on behalf of others for a fee to attempt to "acquire or dispose" of real estate? Is the distinction only with regard to the type or extent of efforts made to sell the property? Neither a listing service or an advertisement guarantee a sale or a price.

What happens when new systems offer the ability to not just describe property, but a link to buyers or sellers, the facility to place offers and a wide variety of related information? Can distinctions be drawn between systems that do that electronically and systems that do it in other ways and which have been traditionally challenged by realtors and regulators?

A 1990 government of BC discussion paper proposing changes (not passed) to the definition of agent as it relates to publishing ads is interesting because it shows how governments can think about these issues. It said the definition was too broad and could, if read literally, require newspapers publishing ads to obtain an exemption from the Superintendent. It said the purpose of the definition was to capture people who attempt to sell real estate by publishing ads in return for commissions based on the sale price and not in return for a fixed charge. It said these advertisers would not be allowed to take part in an offer or sale of real estate and will not be able to discuss the property with a potential purchaser. A distinction between commissions based on a percentage of the sale price and fixed fees does not appear valid given that more and more realtors are using set fees. If set fees for ads, agency relationships and types of information and services offered are the factors distinguishing listings from advertising and information services what are the details and underlying rationale? If auctioneers can now (1996) sell and advertise real estate without being licenced provided they don't show homes what is the rationale? Are rationales consistent?

CREA has ruled that members are only obligated to register properties on the MLS system if there is a "listing" involved and they suggested that the existence of an agency relationship was the key distinction involved in that determination. If no agency relationship existed or one had contracted out of all agency responsibilities then the obligation or right to list on MLS would not exist. On the other hand it could mean that others could do everything with respect to listing type activities provided no agency relationship existed. CREA, in working with the Competition Bureau, has tried to define listing as "An agreement between a client and broker with respect to a transaction (sale, rental, lease, option exchange of real property or an agreement to offer therefore) and the remuneration of the broker therefore". The Real Estate Act does not include a definition of listing.

If, beyond the set fee issue above, the agency relationship is key to this listing debate then exactly which functions create the agency relationship and how do evolving functions and factors like title insurance impact the existence of agency relationships? This is discussed below.

Another factor impacting this element of realtor practice is the possible development of databases that could compete with realtor-based multiple listing services (MLS). For example, the BC Assessment Authority and a major financial institution are reported to have considered using the assessment authorities database, which can include pictures of properties, as a source for instant and electronic market appraisals and comparative studies. The idea was quashed because of opposition. Although not currently a factor and there is no indication title insurers or others contemplate this, it is possible that any group with a comprehensive listing of properties could do the same. Would it not be possible to take these "virtual" communities and start hanging for sale signs on the properties for sale? Would a professional realtor not be required ethically to use each and every means available to promote a property?

Another example of where title insurers have changed the system is the simple fact that lawyers in many jurisdictions have developed their own title insurance systems. If consumers want the products then lawyers, notaries and possibly realtors and others will likely want to promote and sell them. Title insurers want to use these groups in this way. If they don't they will likely try to introduce escrow agents to engage in conveyancing and promote the products. In Ontario now lawyers are advised to tell clients about the Law Society's title insurance package only. Should lawyers and lawyer organizations have to make consumers aware of other types of title insurance if that is in the consumer's interest?

Integration of Professions

The various professions and occupations involved in the real estate workplace will likely exist in the future, but their respective areas of exclusive function may be narrowed while areas of competition, cooperation and integration could increase. Public and private sectors could also become blurred.

Many functions or activities and problems or elements of transactions can't be neatly compartmentalized. Multi-disciplinary practices or other business arrangements do exist and have been studied in depth by groups like the BC Law Society. Some see this as a threat to the independence of professions. They argue it changes the ability to provide objective advice and representation without the interference of others. In the case of integrating certain public and private functions it is worthwhile noting that the government of BC has indicated it is interested in privatizing more elements of public administration.

Professions involved with real estate are to some extent engaged in a common enterprise with similar or related systems, administration and objectives. The potential for their activities to become more integrated exists because of digital technology and software systems that handle documents and transaction processes. This does not mean systems will be centralized. It could mean the opposite. If technical and administrative standards and systems of oversight are in place a great deal of work could be decentralized, delegated and privatized. More people could be involved. If electronic communications between private groups and public and private sectors are possible then time and distance mean less and the concept of one group filing documents with another group could give way to a concept of continuous and common administration.

The Internet could become another integrating although not centralizing factor and a crucial means of providing government services. People could renew licences, book campsites or update Medical Services Plan information over the Net. Every form, real estate related or not, that a government employee passes across a counter to a member of the public or a professional group like lawyers can be distributed, filled out and returned through the Internet. As more individuals and organizations turn to the electronic highway for information about their environment, on-line publication will be less an option and more of a necessity. Electronic forums could complement traditional polling as a way of gauging public opinion. In the real estate context this could involve ongoing public input on service and consumer protection matters.

Agency and Professionalism

The concept of agency is fundamental to how professions and occupations in the market are perceived, defined, distinguished and regulated. For example, it was shown above that real estate organizations were using the existence of agency relationships to distinguish whether a listing agreement existed. If government and consumers perceive a group as having a specific expertise that others don't have and they need that expertise then a trust or dependency relationship and fiduciary duties can arise. The key is often whether a task is done for oneself or others. Lawyers may not care if lenders draft mortgages because it involves the lender's interest. A conveyance document would involve the consumer and lawyers would argue that doing that for someone else is the practice of law.

Expertise can result from specialized education or just established practice. With the latter, for example, lawyers don't inherently have expertise with conveyancing or other aspects of real estate practice because in many parts of the world they don't even get involved with it. The established practice here is that they are involved and thus they have the expertise.

If agency relationships depend on what a person or group does for others then if those functions change agency relationships will also change. The arguments above just highlight a few areas that could result in traditional functions changing. Because of economic pressures many groups are looking for new services to offer. This could involve truly new services or encroachments on the traditional territory of others. Technology and software can make it possible to perform new tasks relatively competently. If functions, agency relationships and the means of consumer protection change then related arguments that if a group is trusted and depended on, or in other words is "professional" and deserving or in need of high entrance standards, exclusive functions or self regulation also change.

It can be important to determine where there is reliance, dependence and trust because that is where agency relationships begin. With respect to realtors, aside from showing that most claims involve negligence (revocations, removal of precedents, drafting errors), negligent or fraudulent misrepresentation and breach of fiduciary duties, research does not provide clear insight into the causes of complaints against realtors. Generally there are few complaints.

Title insurance or related factors can have three clear impacts. First, as noted above, it can highlight and force a review of who does what and where the risks for consumers lie. Secondly, the types of systems and software that develop to minimize risks of mistakes and insurer exposure (e.g. Title Plus and related insurance industry systems) can reduce dependency. Third, where risks remain and are manageable title insurers can assess the risk and cover it. This also reduces dependency. When government considers issues of exclusive functions in a workplace or market it looks at whether groups have insurance and other protections for consumers so changes in the insurance realm can change the system. If consumers are adequately protected by title insurance or other means then arguments in favour of professional exclusivity are weakened. This discussion inevitably leads one to ask where the risks are and what existing insurance or regulatory coverage there is relating to those risks. Something like title insurance can potentially "fill in the gaps" of protection where functions change depending on what the specific policy covers. As discussed above, the potential for title insurers to increase their already relatively broad coverages exists.

This in no way attempts to diminish the valuable role of each professional. The argument is simply that new developments will likely at some point force a review of functions so each is performed competently and cost efficiently. Arguments of professions will have to be grounded in terms of real consumer protection and not the blanket defence of the status quo. It is in everyone's interest, including that of title insurers, to ensure various tasks are performed well. It is in the interests of title insurers not just to keep the land titles system working well, because their exposure will be less, but to work with professional groups to determine where the skills of specific groups are necessary so mistakes and claims are minimized. Reduced duplication, increased protection and cost savings should be the goal.

No system is perfect and there will always be mistakes. Minimizing risk is everyone's business, but assessing risks and insuring against them is the expertise of insurers whether they are involved with title insurance companies or lawyers' errors and omission insurance. Lawyers often advise clients about risk but are not in the business of quantifying or accepting it. They must try to minimize it.

Education

Education relates to functions, consumer protection and agency relationships. How education for real estate professionals evolves will also be impacted by the changes discussed above. Standards relating to licensed professions or occupations should be discussed in the context of evolving functions. Excessive credentialism and educational requirements that are not appropriate to functions and consumer demand and willingness to pay can distort prices and result in market substitutions.

If education standards are relatively low and entrance to a group is easy then this exclusivity issue is less of a factor. Some groups argue that greater expertise is needed to serve and protect consumers. It is arguable, however, that less exclusivity often exists with regard to tasks that require the higher levels of expertise. For example, realtors would have trouble arguing that only they can give a consumer advice about market price, investment quality and the future of interest rates. As for more routine functions, they would have trouble arguing that only they can show homes when consumers face little risk. At each end of the spectrum exclusivity is open to question.

As with the real estate workplace where various parts of the world have developed different forms of land management, educational systems also differ. Systems involve specialized workers and also people with broad skills that end up working in a variety of real estate related fields. Again, the BC way is not necessarily the only way of doing things.

Conclusion

Canadian jurisdictions need to approach education and allocation of functions issues with an open mind. Some form of deregulation or reformed regulation of the real estate workplace seems likely. A centralized system with clearly defined groups and functions carefully engineered by government and enforced by law may be a less desirable option than a system that evolves and embraces diversity and competition in a context of sound and flexible systems of land management and consumer protection.

Materials Reviewed

1. Report of the Special Committee on Title Insurance, Law Society of Upper Canada, Summer 1996.

Real Estate Checklist, Professional Standards Committee, Law Society of Upper Canada, June 1995.

2. "Controversial Mortgage Program Continues to Expand" Bar Talk - Newsletter of the Canadian Bar Association (BC Branch), June 1996 Vol. 8 No. 3.

3. "Law Society Takes A Closer Look At Title Insurance Plan For Mortgages", Benchers' Bulletin - Information Bulletin on Law Society of BC Activities, No. 2 March-April 1996.

4. "Law Society Probes Deeper Into Title Insurance", Benchers' Bulletin - Information Bulletin on Law Society of BC Activities, No. 3 June 1996.

5. Real Estate Liability Insurance Revamped, Globe and Mail Report on Business, September 30, 1996.

6. Getting the Lawyers Out of Real Estate Deals, Financial Post, Tuesday, August 13, 1996.

7. Report To Canadian Bar Association, October 7, 1996 by Peter D. Warner and Sandra Jakab-Hancock.

8. Title Insurance Update by Sandra Jakab-Hancock, BC Law Society's Title Insurance Committee.

9. Discussion paper on amendments to the Real Estate Act and the Mortgage Brokers Act, January 1990.

10. S.W. Hamilton and W. Stanbury, Real Estate Brokerage: Perceptions >From Within the Industry, unpublished, September 1994, UBC Faculty of Commerce and Business Administration, p. 1.

11. Real Estate Act, RSBC 1979, Chapter 356.

12. Land Titles Act, RSBC 1979, Chapter 219.

13. Task Force Report of British Columbia Real Estate Association (Skaley Task Force). Informal group established to responded to Real Estate Institute's Hamilton Stanbury studies.

14. Law Society of BC, Benchers" Bulletin, March-April 1997.

15. Multi-Disciplinary Practice - A Report Prepared for the Professional Standards Committee of the Law Society of British Columbia by the Multi-Disciplinary Practice Subcommittee, February 1994.

16. Canadian Realtor Paper 1996. Date unknown.

17. The Death of Common Sense: How the Law is Suffocating America by Philip K. Howard, Random House.

18. The Need for Economic Perspectives on Legal Reform, Canadian Lawyer Magazine, October 1996.

19. Report on the use of the internet in government. "Study informs B.C. deputies of anarchy on

the Internet" by Russ Francis. Report is available at the Information and Technology Access Office site at www.gov.bc.ca.