International Technology

CANADA

Fast Forward for Ontario's Real Estate Practice

By Scott Nesbitt

CANADIAN UPDATE Hot Projects The Supreme Court of Canada has signed QuickLaw Inc. and Juricert Services Inc. (with funding provided under the Government of Canada's e-government infrastructure efforts) to explore e-filing. Quicklaw will manage, store and deliver electronic data; Juricert will authenticate online identities of participating lawyers, staff and members of the public participating in the secure electronic transactions. Meanwhile, the Federal Court of Canada also has announced a proposal for electronic filing. The pilot project will include participation of external clients (e.g., bar associations, courts, tribunals, boards, commissions and departments) who will help develop common standards and architecture. Under this same e-government initiative, a consortium led by Bell Canada Enterprises -- including Bell, BCE Emergis and CGI -- has been awarded a $57 million contract to build and manage "Secure Channel" to allow Canadians to access government services electronically. It will include an I.P. network, security, authentication, directory services, application integration services and portal interfaces. Bell's Data/I.P. company Bell Nexxia, in partnership with BCE Emergis and CGI, has brought together a consortium that includes IBM, Microsoft, Cisco, Entrust, Canada Post, PricewaterhouseCoopers and JetForm. Canada has also signed a joint statement on global electronic commerce and e-government with the United Kingdom, showing their respective commitment to cooperate on these two programs. Elsewhere, Teranet and POLARIS, the province of Ontario's Land Registry Information System database, continue to convert the Province's land registry offices to an electronic registration system. --David Bilinsky David Bilinsky is Practice management advisor and staff lawyer of The Law Society of British Columbia.

TECHNOLOGY is transforming real estate conveyancing in Ontario as the province shifts from a 200 year-old paper-based land registration system to an electronic system known as e-reg. Title "documents" are created, exchanged and submitted electronically and do not have to be produced in paper form to have legal effect.

E-reg eliminates the need to physically attend at one of the province's 55 land registry offices to complete a real estate transaction.

E-reg is the culmination of 10 years of reform in Ontario's land registry system. In 1991, the Ontario government partnered with a consortium of private sector companies to form Teranet Land Information Services Inc. The new company's first priority: to create a database of all titles, documents and maps for more than 4 million properties. Started in 1992, Teranet reports that the conversion process is about 70 percent complete.

Legislative amendments in 1994 addressed some of the well-entrenched legal principles of conveyancing that presented potential barriers to the implementation of e-reg. The amendments do away with the 325 year-old Statute of Frauds requirement that the creation or conveyance of an interest in land be in writing and signed. An electronically registered title document now has the same legal status as a signed paper document. Indeed, the changes go even further to stipulate that the contents of an electronic document prevail over any paper form of the title document.

Requirements for affidavits or declarations in support of certain registrations have also been amended. "Solicitor's statements" serve as an electronic substitute for conventional forms of supporting evidence. A lawyer simply completes a series of prescribed "compliance with law statements" on-screen and these are deemed to satisfy all evidentiary requirements.

In 1996 the Law Society of Upper Canada (the governing body for Ontario's lawyers) joined with the Ontario Bar Association and other stakeholders to establish a Joint Committee on the Electronic Registration of Title Documents. Its mandate is to establish appropriate e-reg practice standards and procedures. The Joint Committee's 1997 report led to proposed changes in the Rules of Professional Conduct to facilitate e-reg.

With this groundwork complete, Teranet was ready for electronic registration. The new system underwent a thorough pilot test in the London, Ontario area from January 1999 to March 2000 and has since been gradually rolled out on a county-by-county basis. In each county the shift to e-reg proceeds in two stages: in the first, both electronic and paper registrations are accepted; approximately 90 days later only electronic registrations are permitted. E-reg is now mandatory in three counties and optional in four more.

Teranet requires that all users have a Personal Security Package to gain access to the system. The PSP consists of an encrypted diskette and corresponding personal pass phrase. Links to the Law Society database ensure that only lawyers in good standing with the Bar complete registrations involving compliance with law statements.

Susan Elliott, director of program management for Teranet, emphasizes the company's focus on security. "Teraview uses industry leading Public Key Infrastructure provided by Entrust to maintain a secure infrastructure from end to end."

Managing the Transition

Mandatory e-reg forces lawyers who may have long established practices and procedures to acquire, learn and use an entirely new way of completing real estate transactions. The Law Society's draft Practice Directives make it a lawyer's professional responsibility to acquire the necessary skills, knowledge and equipment for e-reg ­ a necessary stance given that the only way to run a real estate practice in Ontario will be through Teranet's e-reg system.

Mark Tamminga, a real estate lawyer practicing in Hamilton, recognizes the discomfort e-reg may cause lawyers. "This is a major change for the real estate practitioner. For some lawyers this is their first real introduction to technology and electronic transactions. It can be overwhelming."

There are, of course, a few stories of senior lawyers or part-time practitioners who have decided not to invest the time or money to make the technological leap. In 1999, a group of lawyers in London went so far as to lobby the government to delay the introduction of e-reg.

Two years later however, any such adverse reception has dissipated. Tamminga's experience is that resistance among practitioners is minimal. "As e-reg progresses, lawyers have begun to settle down and feel more comfortable with the system. Attitudes have changed."

Mark Durward, a Hamilton lawyer who conducts e-reg info sessions on behalf of the Law Society across the province, notes a similar trend. "Most lawyers are sincerely trying to adapt to the new technology. Groups of lawyers are embracing the concept and moving forward. I haven't come across anyone who says 'I'm not going to do it.'"

Lawyers are well supported during the transition. The joint committee's education subcommittee arranges general information sessions and more detailed CLE seminars for practitioners as e-reg is introduced. It also operates an advisory service to assist conveyancers and promotes local user groups so that lawyers can work through the transition together. On the technical side, Teranet provides a range of software support services and material.

The end of paper transactions?

Proclaiming the end of paper in all real estate deals may be premature. Not all registrations can be made electronically and many solicitors still exchange ancillary paper documents. The current banking system also impedes e-reg's effectiveness.

As Mark Durward states, "The greatest difficulty in the transition to e-reg is the marriage of the new technology with antiquated banking technology and practices used in conveyancing." Indeed, Durward attributes recent Teranet server access problems on busy transaction days to the fact that most lawyers delayed registration until the late afternoon after all banking had been completed.

"Certification of funds at the bank continues to be the bottleneck in the way we close deals. As long as we rely on paper money, the potential for e-reg to truly revolutionize conveyancing practices may be limited," he notes.

The government, Teranet and the Joint Committee are working with the financial sector to develop a real-time electronic transfer of certified trust funds.

Despite some issues that remain to be tackled, the launch of e-reg in Ontario is becoming a model for paperless land registration systems and transactions around the world. Japan, New Zealand, South Africa, Jamaica, Lebanon, the Czech Republic and the United Nation's Working Group on E-Commerce have all demonstrated an interest in the Teranet technology.

There have been more than 80,000 successful e-registrations to date and there are likely to be more than 160,000 by the end of 2001. Once fully implemented, e-reg promises a more accurate, fast, efficient and secure document registration system. Conveyancing in Ontario will never be the same.

Scott Nesbitt is a law student at Dalhousie University in Halifax, who works at the Hamilton, Ontario office of Gowling Lafleur Henderson L.L.P.