Real estate challenges in the coronavirus era

Like almost everything in life, it’s all relative. While real estate lawyers in Canada are in the same collective COVID-19 pandemic lockdown as everyone else, they are actually probably in a better position than many others to maintain some semblance of a practice if this pandemic persists. While it obviously isn’t business as usual, real estate lawyers in Canada remain, for the most part, fully capable of continuing their livelihoods with relatively minimal disruption.

In every jurisdiction that has declared a state of emergency, land registration and lawyers have been exempted from forced quarantine/closure rules. In Ontario, there have been two emergency orders issued during this pandemic forcing the closure of businesses. Land registration services and “professional and social services that support the legal and justice system” have been deemed essential in both orders, and so the prevailing view seems to be that lawyers can stay in business.

However, asking whether or not lawyers are designated as “essential,” at least in Ontario, misses the point. Even if lawyers are no longer designated as such, there is no law prohibiting lawyers from carrying on their practices online; indeed, all governments in Canada are encouraging working from home and conducting commerce online wherever feasible.

As a general rule, the technology exists to permit real estate lawyers to continue their practices online, without the need for a physical office or an attendance at the land registry office. Nearly all of Canada’s ten provinces, and Yukon, operate electronic land registration systems where deeds and mortgages can be searched and registered. Furthermore, every such electronic land registration system can be accessed remotely and remains fully operational notwithstanding declared states of emergency and in some cases, the closure of any corresponding physical land registry offices.

The proof is very much in the pudding. Although Canadian provinces do not regularly release land registration volumes on a regular basis, anecdotal evidence suggests that volumes remain steady to date, year over year, across Canada. In fact, a number of jurisdictions seem to have seen a slight bump in registration volumes at the end of March (perhaps reflecting deals being closed in advance in anticipation of future registration problems).

There have, however, been a few challenges for the real estate bar in the early days of this pandemic lockdown. A number of jurisdictions have struggled with statutory requirements for in-person attestation and affidavit swearing, but almost every jurisdiction has overcome those requirements with some combination of legislation, emergency regulation, law society edicts or registrars’ fiats. Virtual witnessing, virtual notarization, and virtual client identification protocols, at least sufficient for the completion of real estate deals, are now ubiquitous throughout Canada.

Moving money has been the bigger challenge. Wiring funds is not widespread practice for residential mortgage transactions in Canada, and most residential mortgages remain funded via the physical pickup, delivery and deposit of bank drafts and certified cheques. Financial institutions remain open for business, but now operating on a restricted basis, some heavily restricted. The result has been that mortgages are being funded, albeit only through large regional branches and during shortened business hours. There have been reports, certainly in Toronto, of long lineups at banks for the pickup and depositing of mortgage funds. Money movement has long been a weakness in the Canadian real estate closing processes, and it is very likely that, post-pandemic, we will see dramatic reforms in favour of secure large-value electronic funds transfer.

Construction has halted in most jurisdictions, and many jurisdictions have temporarily banned residential evictions, but no jurisdiction in Canada has banned mortgage enforcement or declared any sort of moratorium or other relief on the payment of mortgage interest. Pundits do not expect any such mortgage relief legislation, regardless of how long the lockdown lasts.

Almost all observers with any line of sight into the real estate market are predicting sustained volumes in the number of closings through April, but slowing down considerably in May as the pipeline of new deals dries up. The Toronto Region Real Estate Board has indicated that Toronto-area home sales (i.e., newly entered agreements of purchase and sale) were up 49 per cent year-over-year in the first 14 days of March, then plummeted 16 per cent year-over-year for the remainder of the month, with net numbers sufficient to provide deals to close in April but not thereafter.

Conditional deals are now being terminated by purchasers almost as a matter of course, with most purchasers holding onto cash in the expectation that prices will fall 20 to 30 per cent by the time this pandemic is over. Nobody, however, is predicting any end to real estate deals unless and until financial institutions stop lending, and there are no indications whatsoever that any financial institutions are even considering such a contingency.

Almost all real estate lawyers are now working remotely from home, although their staff continue to do in-person banking to support closings. While the lives of real estate lawyers have been hectic to date and can expect to remain so until the end of April, all real estate lawyers are now budgeting for precipitous drops in work in May and beyond. The concerns over staff and office expenses that are being experienced by many other lawyers today are expected to be visited upon the real estate bar in about a month’s time.

We are indeed cursed to live in interesting times.