"No snowflake in an avalanche ever feels responsible."
- Stanislaw Lec (1909-1966), Polish/Jewish poet and satirist
A group representing 200 homebuilders in the province is challenging the Law Society of Newfoundland and Labrador to justify a controversial fee that private- practice lawyers are downloading onto their clients.
The Canadian Home Builders' Association of Newfoundland and Labrador (CHBA-NL) has sent the law society a strongly worded letter (a copy of which The Telegram was able to obtain, see page A17) asking for accountability and transparency, and says if it doesn't get a satisfactory response, its members could start refusing to pay the transaction levy in February 2012.
"A lot of our members are really upset about it," said CHBA-NL president Craig Williams, who sent the letter to the law society and to CHBA-NL members Friday.
"We feel that it should be re-addressed. We've had consultations with our members and have a couple of actions we'd like to take."
As noted in my Nov. 26 and Dec. 3 Telegram columns, the levy - $50 plus tax - has been in place since 2005. Ostensibly created as a short-term measure to offset increasing insurance costs for private-practice lawyers, the charge is applied to every civil suit and real estate deal in the province.
While the lawyers involved are ultimately responsible for paying it, most pass the cost on to their clients. As a result, the law society's insurance program now truly is a cup that doth runneth over - with a surplus of $10 million at last count.
Back in 2005, when the levy was rolled out, the law society said its members could be facing insurance premiums as high as $15,000 apiece, annually. Premiums were expected to rise, in part, as a result of claims stemming from the bankruptcy of developer Myles-Leger in 2004.
"Fifteen thousand dollars a year in insurance fees doesn't sound like a lot to me," said Williams.
He should know. His company, Skymark Homes - like other metro-area homebuilders - is constantly plagued by thieves at building sites who make off with construction supplies and even fixed items like air exchangers, heaters and light fixtures.
"My rates keep going up. If somebody comes in and steals me blind ... I can't claim any of that, because if I did, I could never afford the insurance," he said.
"There may have been a point where lawyers, because of their own actions, became uninsurable. ... We shouldn't be paying for their professional risk."
But the member companies of CHBA-NL are paying - through the nose.
Williams knows of companies that pay $10,000 a year in transaction levies. And that adds up across the industry and drives up the cost of new homes.
"That's why we're at the table (now)," Williams said. "Our industry, in terms of new home construction, is paying in excess of $400,000 a year, and that gets passed on directly to the public."
That goes against the grain for Williams, who takes pride in his association's mandate to make housing more affordable.
Insurance premiums keep getting lower
In fact, members of the law society never got close to paying $15,000-a-year insurance premiums.
Thanks to the nice soft cushion provided by the transaction levy, their premiums have gone steadily down, from $6,000 in 2005, $5,200 in 2006, $4,800 in 2007, $4,650 in 2008, $2,180 in 2009 and 2010 and $1,830 in 2011. In 2012, they'll pay just $1,655 annually - well below the national average and less than some lawyers make in a day.
(By comparison, Ontario lawyers paid $3,350 in 2011 and will pay the same in 2012).
Not only that, actuaries of the law society's insurance program have said a surplus of $6 million is required to keep rates steady, but they'll soon have twice that amount to play with.
And some of the money has been used to defray general operating costs of the law society, which is not how the levy was sold to the public.
Too little, too late
On Monday, in a dubious show of magnanimity, the law society told its members the transaction levy will drop to $40 in January, but the CHBA-NL isn't exactly impressed.
"Right now, it looks like the fee should just be shut down," Williams said. "They say they're going to reduce it to $40. ... That's not much of a Christmas present."
He said the fund should have accountability built in.
"It's a non-issue for lawyers," he said. "They've had no reason to kick up a stink. ... (But) there has to be some kind of trigger that says, 'We have enough money now.'"
May refuse to pay
Williams said his group has an action plan in place, based on the law society's response to his letter.
"Our game plan is not to be overly aggressive or disrespectful, but we feel this is an issue for public debate," he said.
"If they could prove to us it was justifiable, we'd say, 'Fine, we'll see you again in a year.' But there's a point where this levy has to be reduced or erased."
If the law society's insurance program can't adequately justify why it needs to keep amassing millions more than it was told was required to stabilize insurance premiums, then the CHBA-NL action plan will ratchet up a notch.
A petition will be circulated to its members in the new year, and then starting Feb. 1, member companies will be told to instruct their lawyers that they will no longer pay the levy.
If it comes to that, the CHBA-NL hopes members of the public will follow suit.
"A $10 reduction is not an adequate response," Williams said. "I think the lawyers in the law society have ended up with some egg on their face, and we wouldn't mind if they addressed our members and outlined their position."
Williams said because lawyers are passing the cost of the levy onto their clients, the levy isn't costing them a cent and they don't feel any need to pay much attention to it.
"But the money is there and that's why accountability is so important," he said.
"(Lawyers are) not policing it, so it's up to the public to police it."
The law society's justification for maintaining such a bloated fund should be interesting. We'll keep you posted.
Pam Frampton is The Telegram's story editor. She can be reached by email at firstname.lastname@example.org. Twitter: pam_frampton