WEST
VIRGINIA STATE BAR
Committee
on Unauthorized Practice of Law
Opinion
No. 2003-01
1. Is
the Preparation of a Written or Oral Report on Property the Practice of Law?
Previously in Advisory Opinion 93-003, the
Committee made clear that a title search is the practice of law and that a lay
person may not conduct such a search for another unless under the direct
control and supervision of an attorney.
The Committee now further finds that it is the unlawful practice of law
for a lay person to prepare any documents or make an oral report that explains
the legal status of title to real estate, the legal effect of anything found in
the chain of title, or the legal effects of other matters found of record that
could effect the marketability of title, unless under the direct control and
supervision of an attorney.
The Committee is of the opinion that the
gathering of factual information that appears in the public record such as the
names of the grantors or grantees, date of the instrument, recording date, or
parties to judgement liens, trust deeds or other instruments of record is not
the practice of law, unless, the gathering of said information is used for the
purposes of determining the quality or validity of title of the present owners
of the real estate or used to assure the quality or validity of title to a
second party for purposes of purchasing said real estate or use of said real
estate as collateral for a secured transaction.
2. Is
the Provision of a Title Search, Exam or Opinion by a ATitle Company@ the Unauthorized Practice of Law?
The Committee is of the opinion that the
rendering of an opinion to another of the legal significance of the presence or
absence of matters of record and/or the condition of the title or the giving of
any other advice concerning the application of legal principles is the practice
of law. As such, only licensed attorneys
may perform this service for others.
The Committee is aware of certain business
organization, whether incorporated or not, that hold themselves out as Atitle companies@, and sell or provide title examinations,
title searches, property reports or otherwise certify the quality or validity
of title or render legal advice. When
these business organizations provide a report that certifies the quality or
validity of title or otherwise provide legal advice, this activity is the
practice of law and may only be rendered by a licensed attorney.
Moreover, W. Va. Code 30-2-5 prohibits
corporations or voluntary associations from practicing law. Accordingly, a Atitle company@ may not employ staff attorneys to provide
this service to others as this would constitute the unauthorized practice by a
corporation or association. Further A[t]he fact that any such officer, trustee,
director, agent or employee shall be a duly and regularly admitted
attorney-at-law shall not be held to permit or allow any such corporation or
voluntary association [to engage in the practice of law].@ Id.
3. What
is the Direct Supervision and Control of a Lay Person in Conducting a Title
Examination?
The committee has found that a lay person
may not conduct a title examination unless this examination is Aunder the direct supervision and control of
an attorney@. For purposes of this
opinion a Atitle examination@ is the process of evaluating at county courthouses recorded
legal instruments such as Deeds and Wills, to establish a history of ownership
(chain of title); reviewing other legal instruments such as rights of way,
leases, deeds of trust, and other liens; making a determination of the
attachment of these liens and encumbrances to the subject real estate;
reviewing tax records to determine proper assessment; and reporting the results
of that examination, by various means, to another.
It is clear that a licensed attorney at law
must be included in the title examination/ certification process. An attorney who a) conducts his/her own
examination and reports his/her findings or b) issues, as a title insurance
agent a title policy based on those findings, is operating within the bounds of
the law. However, when a lay entity is
involved in the process, the committee feels further guidance is necessary. What is meant by the phrase Aunder the direct supervision and control of
a licensed West Virginia Attorney@?
The Committee finds as follows:
I.
Non-lawyer searchers may not offer any service which constitute the
practice of law to the general consumer public.
II.
A lawyer may employ a non-lawyer assistant in the representation of the
attorney=s client; so long as:
a. The
attorney retains a direct relationship with the client.
b. The
client understands that a non-lawyer will be conducting the title examination.
c. The
lawyer, based on the certification, education, training, experience of the
searcher, reasonably supervises the searcher throughout;
d. The
lawyer remains solely responsible for the work-product, including all actions
taken or not taken by the searcher to the same extent as if such search had
been furnished entirely by the lawyer.
III.
Subject to the provisions of Section II, above, lay title agents must
use the services of a licensed West Virginia attorney to conduct a reasonable
examination of title prior to the issuance of title insurance policies, but
they are prohibited from sharing fees with that lawyer for title examinations.[1]
4. Is
a Title Search, Exam, or Opinion Prepared by a Non-Lawyer and Provided to
and/or by a Lender in Satisfaction of a Borrower=s Condition for a Loan the Unauthorized
Practice of Law?
As a condition of the loan, the lender
generally requires the borrower to provide a title search, exam or opinion
certifying, proving or indicating the validity or quality of title of the real
estate. The lender also often requires
the borrower to purchase title insurance to protect the lender=s lien or encumbrance. It is the lender that selects and/or
contracts with the insurance agent or company and places the request for the
insurance. The title insurance company then
obtains a Apreliminary report on title@ from its employees or contractors. Licensed attorneys do not perform these Apreliminary reports on title@.
These non-lawyer Apreliminary reports on title@ are relied upon by the title insurance
company for purposes of determining exceptions to and requirements of issuing
title insurance. The borrower pays for
the lender=s title insurance and also pays for the non-lawyer>s Apreliminary reports on title.@ The
circumstances imply the borrower/purchaser is paying for a title search or
other certification of the quality or validity of title to the real estate that
is being purchased. The HUD settlement
statement prepared for closing reflects that, not only does the
borrower/purchaser pay for the title insurance to protect lender, but also pays
for an Aabstract@, Atitle examination@ or Atitle search.@ There is no other
search preformed.
The borrower/purchaser may not be informed
that the Aabstract@, Atitle examination@ or Atitle search@ that they pay for is not prepared by a lawyer. The Apreliminary report on title@ is prepared for the sole purpose of
insuring the lender=s interests and satisfactory to the insurance company for the
risks it is assuming for the premium paid.
Indeed, borrowers/purchasers are sometimes offered owner=s title insurance for an additional premium
but they most often decline based upon the assumption that they have received
assurances of the quality or validity of title that they have acquired. Moreover, lenders are accepting this
non-lawyer Apreliminary report on title@ on behalf of the borrower as satisfaction
of the loan condition that borrower provide certification of the quality or
validity of title. The
borrower/purchaser also relies upon this non-lawyer Apreliminary report on title@ as being the required certification of
title. Thus, in practice, the lender is
accepting a non-lawyer Apreliminary report on title@ and, in turn, providing this said report
from the title insurance company to satisfy borrower=s condition of certifying the quality or
validity of title. The lender,
therefore, is providing a legal service in the form of a title exam or an
opinion of the condition of the borrower=s title. The lender is
not an attorney. This is the
unauthorized practice of law by the lender in West Virginia.
The committee further understands that
lenders also directly purchase non-lawyer Aabstract@ or other non-lawyer certifications of title from title
companies or others and that they are Aproviding@ those to the borrower as certification of title in the same
manner as preliminary reports of title for lender=s title insurance are provided. This, too, is the unlawful practice of law by
the lender in West Virginia.
The Committee further notes the W. Va.
33-11A-11[c] provide that when insurance is required as a condition of
obtaining a loan, A[n]o title insurance shall be issued until the title
insurance company has obtained a title opinion of an attorney licensed to
practice law in West Virginia, which is not an employee, agent, or owner of the
insured bank or its affiliatesY@
5. Does
a Lay Person Who Conducts a Real Estate Closing Engage in the Unlawful Practice
of Law?
The issue before this Committee is whether
real estate closings conducted by lay persons constitute the unauthorized
practice of law
From
documents submitted to the Committee various activities can occur at real
estate closings in connection with the purchase and financing of the purchase
of residential real estate or the refinancing of prior existing secured
loans. These activities include, but are
not limited to, the following:
1. Reviewing the final terms of the transaction in connection with the sales contract;
2. Completing legal documents, including deeds of trust or other security instruments, notes, riders, and rights of rescission;
3. Making certain that lenders will have valid first liens upon property conveyed as security;
4. Reviewing title insurance binders or opinions to determine what is included or excluded and that title policy requirements can be met;
5. Determining that the legal description of the land conforms with a survey;
6. Determining that easements and/or other restrictions have been identified and have not been violated or encroached upon;
7. Determining if there is sufficient evidence of hazard insurance;
8. Determining the amount of taxes owed and providing for payment of taxes at closing;
9. Preparing HUD form 1, settlement statement;
10. Addressing contingencies specific to the transaction;
11. Attending the closing and obtaining appropriate signatures on documents;
12. Attending the closing and answering buyer and/or seller questions about documents and/or the transaction;
13. Recording documents and seeing that releases for payoffs are recorded and security instruments constitute valid liens; and
14. Escrowing and disbursing proceeds.
The practice of law, as described by the West Virginia Supreme Court by Rule on March 28, 1947 and amended July 1, 1961 states in relevant part:
In general, one is deemed to be practicing law whenever he or it furnishes to another advice or service under circumstances which imply the possession or use of legal knowledge or skill.
More specifically, but without purporting to formulate a precise and completely comprehensive definition of the practice of law or to prescribe limits to the scope of that activity, one is deemed to be practicing law whenever (1) one undertakes, with or without compensation and whether or not in connection with another activity, to advise another in any matter involving the application of legal principles to facts, purposes or desires; (2) one undertakes, with or without compensation and whether or not in connection with another activity, to prepare for another legal instruments of any character; or (3) one undertakes, with or without compensation and whether or not in connection with another activity, to represent the interest of another before any judicial tribunal or officer, or to represent the interest of another before any executive or administrative tribunal, agency or officer otherwise than in the presentation of facts, figures or factual conclusions as distinguished from legal conclusions in respect to such facts and figures. Nothing in this paragraph shall be deemed to prohibit a lay person from appearing as agent before a justice of the peace or to prohibit a bona fide full-time lay employee from performing legal services for his regular employer (other than in connection with representation of his employer before any judicial, executive or administrative tribunal agency or officer) in matters relating solely to the internal affairs of such employer, as distinguished from such services rendered to or for others.
While
some ministerial and clerical functions occur as part of a real estate closing,
i. e., preparation of the HUD settlement statements, simple execution of
documents, and disbursement of proceeds, 2 in
general, legal principles are applied to the factual situation to determine if
and how the transaction should be concluded.
For example, there is a determination that the lender can obtain a valid
first lien; that the legal description of the land conforms to the survey; that
the title insurance requirements have been met; that evidence of hazard
insurance is sufficient; that easements and other restrictions have been noted
and have not been violated or encroached upon; and that legal instruments have
been properly signed to constitute binding documents to achieve their legal
purposes. Most importantly, however, it
is inherent at the closing itself that buyers and sellers will have questions
about the transaction and the documents, which answers necessarily go to their
respective legal rights and obligations.
Such answers are advising on legal matters. Thus, in West Virginia, generally, real
estate closings constitute the practice of law.
In conclusion, it is clear that as a whole, real estate closings are the practice of law. The Committee presumes that significant harm to the public occurs just by the practice of law by lay persons and holds such practice to be the unauthorized practice of law.[2]
The reference to lay persons in this section does not apply to a non-lawyer assistant employed, retained by or associated with a lawyer in accordance with Rule 5.3 of the Rules of Professional Conduct and consistent with all other Rules of Professional Conduct.