Real estate lawyers met with a litigation firm on Tuesday to explore a potential class-action lawsuit against Dye & Durham Ltd. DND-T in response to the legal software provider announcing price hikes on Monday, a year after raising them 400 per cent and guaranteeing the price would not increase for three years.
The real estate practitioners attended a virtual meeting with Toronto-based Charney Lawyers, which specializes in class-action lawsuits. Some D&D customers allege the company did not honour a three-year price freeze the company announced in an e-mail to customers in January, 2021.
“We did meet with a number of very irate real estate practitioners who are seriously considering commencing proceedings,” said Ted Charney, president of Charney Lawyers.
Dye & Durham announces more price hikes on Canadian clients
Last January, D&D raised the conveyancing fee to buy, sell or refinance the mortgage on a property from $25 per transaction to $129 per transaction in Ontario, after acquiring DoProcess, Canada’s largest provider of real estate practice-management software, from Teranet Inc. in late 2020 for $530-million. Those fees are passed on to home buyers as a closing cost.
“In recognition of your loyalty, current customers will receive a minimum three-year price guarantee on purchase, sale, and mortgage files, ensuring no further price increases in the foreseeable future,” D&D wrote to clients at the time in an e-mail obtained by The Globe and Mail.
D&D clients in Ontario learned Monday that their transaction fee could rise to $249 next week, amounting to a 900-per-cent increase in just over one year. That transaction fee is the most expensive of three packages clients will have to choose from to continue using D&D’s Unity software after Jan. 31.
The two other packages, which lock clients into a three-year contract, are reserved for clients who process a minimum number of deals each month. Clients that do a minimum of 100 deals each month will pay $199 per transaction, and those that process a minimum of 50 will pay $229 per transaction. Users who do not sign up for a specific package will be slotted into the contract-free $249-per-transaction bundle on Jan. 31, along with small practitioners in Ontario that do fewer than 50 deals each month. D&D said the prices of bundles will vary by province.
“The bundles Dye & Durham announced yesterday are a new and fundamentally different product than what Unity was on its own,” D&D chief commercial officer John Robinson said in a statement to The Globe.
Mr. Robinson said Monday that D&D has improved Unity’s capabilities since its acquisition. Real estate practitioners have disputed this claim, arguing the product has deteriorated since the takeover.
“We believe Unity is the most advanced conveyancing software product in the world today and drives significant efficiencies for legal professionals,” Mr. Robinson said. “Existing Unity customers are not under contract and have always had the option to switch to another software provider at any time.”
Unity is the dominant conveyancing software in the Canadian market, especially in Ontario. According to BMO Capital Markets analyst Thanos Moschopoulos, Unity handles more than 700,000 transactions a year in Ontario, and 1.4 million in Canada annually. There were 666,995 home resales in Canada last year, a record, according to the Canadian Real Estate Association.
Some fed-up legal practitioners have shifted to other providers such as Toronto’s LawyerDoneDeal Corp., while others have remained customers, citing high switching costs and the inconvenience of eliminating a software their law practices are built on.
In a research note on Monday, Mr. Moschopoulos said the Unity price hikes could “translate into $62-73-million of incremental annual revenue” before accounting for churn. Even then, he expects churn to be mitigated by the lack of viable competitors – other than LawyerDoneDeal – and high switching costs, and because fees are ultimately passed on to a lawyer’s clients.
“The magnitude of the increase is such that D&D would likely be able to withstand a very large spike in churn while still meeting/beating consensus,” he wrote.
Olena Chepil, a Toronto-based real estate lawyer, started building Quintalink, an alternative to Unity, after the price hike last year. She said the product will be cheaper to use than Unity, and provide a better experience.
“Competition imposes the desire and ability to make products better and more affordable,” she said. “And right now there is none.”
Ms. Chepil had planned to launch Quintalink in June, but is now trying to accelerate the launch date after the D&D price increase, which she said drove an influx of interest on Monday. She also criticized D&D for giving its customers a week to pick a package, and steering them into a three-year contract by making the most expensive bundle commitment-free.
“My advice to lawyers would be just wait, be patient because I know the new software is coming, and don’t lock yourself into a contract that you will have a very difficult time getting out of,” she said. “What may seem like a good saving right now may not be such a good deal in three, four months. ... Sign up for LawyerDoneDeal, sign up for Quintalink, and then compare.”
As she develops her software, Ms. Chepil said she is filing a complaint about D&D to the federal Competition Bureau. Real estate lawyers across the country have done so before. In British Columbia, rate hikes by as much as 563 per cent on a D&D product prompted dozens of complaints to the Competition Bureau, The Globe reported in November.
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Jaren Kerr