Sometimes the line between services provided by non-attorney title and settlement professionals and those by lawyers becomes blurred. This happens in states where it is common practice for a title agent representative to appear at a mortgage closing and in the course of managing the title and disbursement side of things, fill in on a review and supervised execution of the bank documents as well. In some cases this is to fill a void where a seller or buyer show up without legal representation (by choice), but in other cases it may be that no attorney is traditionally involved (a refinance closing).
Reviewing loan documents, answering questions about contract and mortgage agreement details often can be seen by some as merely elements within the broader “title and settlement” functions often performed by non-lawyers. However title and settlement agents who are not lawyers need to be very careful about crossing the line and creating liability for themselves and their companies, as well as possible civil or criminal penalties if the activity is reported.
Recently the Rhode Island Supreme Court Unauthorized Practice of Law Committee heard a complaint filed by an attorney against a title and settlement firm in that state where a non-layer owner of that firm appeared and gave advice to the seller in a sale transaction. The advice, which went above and beyond title searches, title insurance and document recording, caused a legal issue that impacted the transaction.
The company appeared at a hearing to defend itself asserting that the services were “common practice” in the state and that the owner asserted throughout that he was “not a lawyer.”
The Committee took a different view, and although acknowledging that the State had carved out an exception in civil and criminal statutes for title agents for the “unauthorized practice of law” the carve out was not a blanket safe harbor for the performance of traditional attorney-client services. After all, conducting property title transfer searches, public records searches, and issuing insurance is not the same thing as drafting and reviewing contracts, explaining legal documents, answering questions about legal issues, and negotiating the resolution of business and legal disputes (including short sales).
While not sanctioning the company (it had no power to do so) the Committee did unanimously agree that the actions of the title agent constituted “unauthorized practice of law” and referred the matter to the state legislature to strengthen existing statutes to close any real or perceived loopholes.
In its conclusion, the Supreme Court Committee stated:
“[T]he following acts constitute the practice of law and can only be performed by a
lawyer: (a) conducting a title examination to determine the marketability of title,
(b) conducting a real estate closing, (c) drafting a deed on behalf of a party to a real
estate transaction, (d) drafting a residency affidavit on behalf of a party to a real
estate transaction, and (e) drafting a power of attorney on behalf of a party to a real
The Committee further recommends that the aforementioned services, as the practice of law, can only be performed by lawyers in either an unincorporated law firm or as a law firm licensed by the Supreme Court….”
As a result all settlement professionals not licensed to practice law (title agents, escrow officers, notaries and real estate agents) take heed. Crossing the fine line between your regulated role and the traditional role played by attorneys in the real estate transaction may create legal liability for your and your company.
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