Massachusetts Requires Attorney’s Substantial Involvement in Real Estate Closings
According to Massachusetts Lawyers Weekly, real estate attorneys who perform “witness-only” closings on behalf of settlement services companies may avail themselves to a Board of Bar Overseers complaint. The Real Estate Bar Association (REBA) said it plans to begin filing BBO complaints this fall, the latest in a series of continued and diverse tactics the group has employed over the years to combat the alleged unauthorized practice of law in the course of real estate transactions.
Massachusetts is one of a handful of states that requires an attorney’s presence and substantial involvement in real estate closings,settlements and refinance closings. For years, REBA has fought against companies that use non-lawyers to conduct such work and/or limit the attorney’s role to that of a witness or notary public at closings.
While critics claim REBA’s sole interest is to maintain and protect business for its members, the association contends it is shielding the public from shoddy work, the unauthorized practice of law, and the potential execution of invalid legal instruments.
Landmark REBA vs NREIS Ruling
REBA’s biggest victory in the struggle came two years ago in its lawsuit against National Real Estate Information Services, a Pennsylvania-based company that offered services related to real estate closings nationwide. According to REBA, while NREIS hired Massachusetts lawyers to attend closings, notarize documents and get them recorded, the attorneys had no control over the activities necessary to ensure that the real estate was properly conveyed.
REBA initially lost the suit in U.S. District Court, but on appeal the 1st U.S. Circuit Court of Appeals certified two questions to the Supreme Judicial Court. While the SJC declined to rule on whether NREIS had engaged in the unauthorized practice of law, claiming it lacked enough information to make a determination, the justices affirmed that the conveyance of real property constitutes the practice of law and requires more than the mere presence of an attorney.
While tasks such as performing a title examination, preparing a title abstract, preparing “mortgage-related forms,” and issuing title insurance do not constitute the practice of law, according to the SJC, other steps, such as drafting a deed and determining the marketability of title, do. The court ruled that a real estate closing “requires the substantive participation of an attorney” and that “a closing attorney’s professional and ethical responsibilities require actions not only at the closing but before and after it as well.” Consequently, REBA has seized on the 2011 SJC ruling to justify its stance on attorney-involvement in real estate closings and used it to convince other alleged wrongdoers to modify their practices.
The Future of ‘Witness Only’ Closings in Massachusetts
The professional responsibility questions that arise in conjunction with real estate closings, and particularly those relating to unauthorized practice, can be thorny and difficult. A number of national title insurance underwriters — including Old Republic Title, Stewart Title, Fidelity National, Chicago Title and Commonwealth Land Title — have instructed their agents to adhere to the SJC’s decision. REBA even filed additional state lawsuits against settlement services companies that resist and, for the first time, started naming local attorneys that work with them in lawsuits filed last year. Many large out-of-state title companies have already ceased doing business in Massachusetts and the recent news regarding witness closings will undoubtedly cause large real estate ‘closing firms’ to conform their closing practices in accordance with Board of Bar Overseers’ caution against witness closings.
As a service to the Bar, the Office of the Bar Counsel operates an ethics helpline to discuss ethical questions that confront attorneys. An attorney who wishes to discuss an ethical question with an Assistant Bar Counsel can call (617) 728-8750 between the hours of 2:00 and 4:00 on Monday, Wednesday, and Friday.
About the Author: Andrew Coppo of Greater Boston Short Sales, LLC (GBSS) is Massachusetts’ leading short sale negotiator. GBSS assists buyers, sellers, real estate agents and attorneys with getting their short sales closed. If you are a homeowner facing foreclosure, or a Realtor seeking assistance with a short sale transaction, contact us today at 617-264-0376 for a free short sale consultation. GBSS is a MARS provider. Please read our disclaimer HERE