No future home help from your lawyer?

What you should know when dealing with a lawyer in regards to purchasing a home.<br />

Q. I was at my lawyer’s office this week signing the paperwork for my new home and she explained that she was working on behalf of the bank and on my behalf and that if there were any problems in the future with the bank, I would not be able to come to her for legal advice. Something about conflict of interest was mentioned but I didn’t really understand what it all meant. Can you explain?

A. This is a very good question and extremely important for home buyers to realize the answer. When you are purchasing a home, you are generally doing so with some funds from a financial institution. The bank wants to make sure that their collateral (your house) is secure so they hire your lawyer (whom they don’t pay) to give them an opinion as to the title of the property and make sure it is free and clear. Likewise, you are hiring your lawyer to do the same thing. It makes perfect sense that your lawyer should do this function for both you and the bank. Otherwise, you would end up paying for two lawyers (because your bank certainly would pass on the charges) to give you an opinion as to “clear title.” However, it is down the line when you decide that your mortgage payments are too high and you can’t afford them, or you want to “port” your mortgage to a new property and they agree verbally but charge you anyway (just to mention a couple of situations) when the trouble arises. Of course you go back to your lawyer and she approaches you very delicately and probably very cautiously.

The issue here is that when you initially purchased the home, she acted on both of your behalves thereby setting up a potential for conflict of interest. If either party wanted to bring legal action against the other. The original lawyer who acted on both sides cannot give any legal advice to either with respect to the problem.

This can be quite frustrating if your lawyer is a trusted advisor who has helped you through other legal hurdles such as buying a business or drafting your wills. Her hands will be tied by both sides in this instance and most proactive lawyers should explain this to you when you are paying for and signing your documents for what might be even you first home. A strange but logical outcome of the law?

– Jeffrey D. Cowan is the principal of Cowan & Taylor, Barristers & Solicitors, The information contained in this article should not be relied upon as legal advice.

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