Can One Lawyer Act for You and Your Lender on an Alberta Home Purchase?

If you are buying with a mortgage, you may be told that one lawyer will handle the purchase for you and the lender. That is common, and it can be a sensible arrangement. It also changes the usual relationship between you and your lawyer, so it helps to understand it before you agree.

This article explains how a joint retainer works in Alberta, where conflicts can arise, and what to ask. It is general information, not advice on your own file.

This article covers the law of Alberta.

Two documents, two parties

A purchase has two main documents. The transfer moves ownership from the seller to you, and the mortgage is a charge on the land that secures a loan between you as borrower (mortgagor) and the lender (mortgagee). The lender wants its security registered properly, and you want clear ownership. Both depend on the same registration steps at Land Titles.

Whether a lender asks to use your lawyer is a practical arrangement between you and the lender, not something the Land Titles Act sets out. Ask your lender and your lawyer how it works in your case.

What the rules say about acting for both

Before acting for more than one client in the same matter, a lawyer must get the clients' consent after explaining the advantages and disadvantages of a joint retainer. The lawyer must also be satisfied that the arrangement serves each client.

The lawyer must warn that information is not confidential between the clients, and that the lawyer may have to withdraw if a conflict cannot be resolved. The Code of Conduct commentary says a lawyer may act for both borrower and lender in appropriate mortgage or loan transactions if both consent, and must disclose all information material to the transaction to both.

• You must consent after the lawyer explains the pros and cons.
• The lawyer must be satisfied that the arrangement serves each client.
• Nothing is confidential between you and the lender on this matter.
• Material information must be shared with both of you.
• The lawyer may have to step aside if a conflict cannot be resolved.

Where conflicts can arise

Most purchases go smoothly, and your interests and the lender's mostly line up. Conflicts can still arise, for example if a problem turns up with title or the mortgage documents, or if you and the lender disagree about the terms. A mortgage must accurately state the interest mortgaged and describe the land sufficiently to identify it, and errors can leave the lender's security defective. A problem like that touches both clients.

The Law Society's practice guidance says that where the likelihood of a conflict is high, joint retainers should not be accepted. If a conflict arises, the lawyer may have to withdraw from acting for one or both clients. That could mean finding a new lawyer partway through, which can cost time.

What it means for you

In practice, anything you tell the lawyer that is material to the transaction may have to be shared with the lender. Be open about the facts, and ask the lawyer to explain before you sign if you are unsure what that means for you.

Lenders commonly use a standard form mortgage that the Registrar has filed. A mortgage that refers to the filed form's identifying number has the same effect as if it set out the full standard terms. Your lawyer should still walk you through the terms you are agreeing to.

Another point to watch is prior relationships. A lawyer cannot act against a former client without that client's consent. So a family or business lawyer who has acted for the seller or the lender could be barred from acting for you. Mention any past dealings when you first call.

What to do next

• Ask whether the lawyer is being asked to act for both you and the lender.
• Ask the lawyer to explain the advantages and disadvantages of a joint retainer.
• Tell the lawyer about any dispute, concern or unusual term in your mortgage.
• Mention any past dealings with the seller or lender.
• Ask what happens if the lawyer has to withdraw.
• If you are not comfortable, say so and ask about other options.

If your situation is complicated, such as a private lender, a business purchase or a family dispute, get advice before agreeing to a joint arrangement.

Frequently asked questions