The managing lawyer at a Toronto digital real estate platform explains how clients are left at risk
A lack of transparency and outdated processes expose clients and lawyers to unnecessary risk in Ontario’s real estate market, says Ed Carmichael, managing lawyer at Ownright, a Toronto-based digital platform for real estate transactions. He points to a system where buyers and sellers often don’t fully grasp the contracts they’re signing or the status of their transactions, leaving them vulnerable when things go wrong.
The iPro Real Trust shortfall is a stark example. In August, the Real Estate Council of Ontario abruptly shuttered iPro, one of the province’s largest brokerages, after discovering a multimillion-dollar shortfall in its trust accounts. Carmichael’s reaction was immediate: “I think my reaction was the same as many onlookers had, whether that's a lawyer or a member of the general public. And that's just shock,” he says.
The fallout was swift and chaotic. Clients suddenly found themselves unable to access funds, with some forced to file insurance claims and wait weeks or months for money that should have been available within days. Carmichael describes a client still waiting for $60,000 held in trust: “They have filed an insurance claim on my advice, but they still don't have that money,” he says. The scandal exposed a deeper flaw: audits of brokerages like iPro can be years apart, creating a window for malfeasance to go undetected. “That's not a very frequent audit, right?... A lot can happen in four years if any malfeasance were to take place,” Carmichael says.
But the risks extend beyond regulatory oversight. The real estate market itself is in flux, with rising interest rates, stalled construction, and a surge in private lending. Many buyers who locked in low rates during the pandemic now face renewals they can’t afford, while pre-construction condo buyers default as values drop. Defaults are rising, and more clients are forced into high-interest private mortgages. Carmichael says the value of private mortgages since 2019 is over 70 percent. "So a substantial amount. And … those carry much higher interest rates,” Carmichael says.
For lawyers, these trends demand a more proactive approach. Carmichael urges lawyers to talk to clients before any major decision – buying, selling, or refinancing – so they understand the risks and costs, including penalties and the implications of private lending. The iPro case, he says, should prompt a rethink of standard practices. A large deposit, once seen as a sign of buyer commitment, now carries added risk if a deal collapses and funds are tied up in a trust account shortfall. “When you have a larger deposit, more is in jeopardy. Because yes, that's the buyer's money, but once it closes, if there's a balance left over once commission is paid out, that's your money as the seller. And so a larger deposit, like it was for my clients that are waiting for the $60,000 back, … actually corresponded with more risk,” Carmichael says.
Carmichael left traditional practice and joined Ownright to help provide more transparency in the real estate industry. He saw an opportunity to address the pain points plaguing clients and lawyers. At traditional firms, he says, data collection was poor and clients had little visibility into what was happening with their transactions. “The notion of a paperless office was non-existent. We did not collect data very... thoroughly on our clients or our partners when it comes to mortgage brokers or real estate agents,” he says.
Ownright’s platform aims to change that. Clients are given a unique login and a milestone tracker for their transaction. Instead of being left in the dark, they can see exactly when key steps are completed – when mortgage instructions are received, when title is searched, when adjustments are confirmed. Clients get real-time updates on closing day, including notifications when funds are received or wired and when the deal is officially closed. “On a purchase, for example, they get to find out when I've received mortgage instructions, when I've searched title, when adjustments have been confirmed with the other side, etc. And then on closing day, the real beauty of our platform is they get real-time updates throughout the day,” Carmichael says.
For lawyers, the technology doesn’t eliminate their role. Instead, it frees them from paperwork and lets them focus on advocacy and client relationships. “We will always have that role to advocate for our clients and protect their best interests, but the medium through which I fulfill that duty to clients is drastically changing with the advent of new technologies,” Carmichael says.
He’s blunt about the profession’s resistance to change. “I think our profession,... is maybe guilty of being Luddites to a certain extent, where we maybe resist technological advancement,” he says. But the market is moving, and clients are demanding more. For lawyers, the message is clear: adapt or risk being left behind.
This article is based on an episode of CL Talk, which can also be found here:
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