'Law-related service' and new RESPA forms: proposed changes in the ethical rules governing lawyers who sell title insurance and perform other 'law-related services' raise concerns among real-estate practitioners.

Author:Weston, James K.
Position:REAL ESTATE LAW
 
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Late last year, the real-estate bar began to focus on a proposed amendment to the Illinois Supreme Court Rules. The change seemed innocuous at first, only semantic in nature. But further study raised concern that the proposed change would have a major impact on the practice.

Problems with Proposed Rules 5.7 and 1.8

The initial source of the change arose from a disciplinary matter before the Illinois Attorney Registration and Disciplinary Commission, In the Matter of Andrew Joseph Rukavina, Attorney-Respondent, No 6184983, Commission No 07 CH 96, filed August 30, 2007 (Rukavina). There, in short, an attorney who supplemented his practice by acting as a title insurance agent was accused of an ethical breach for not having disclosed the title agency relationship to clients he represented in a real estate transaction. The attorney received compensation from both the clients and the title company principal.

The case inspired a review of the Proposed Rules of Professional Conduct submitted to the Illinois Supreme Court by the ISBA/ CBA Joint committee on Ethics 2000, with specific focus on Proposed Rules 5.7 and 1.8. These deal with the relationship of attorney and client when the attorney provides "law-related services." This term is distinguished from the "practice of law," and therein lies the problem.

Law-related services are available in the marketplace from nonlawyers. Preparation of tax returns is but one example. Under the proposed rule, an attorney who wishes to provide such ser vices must first notify the client that a potential conflict of interest exists and suggest to the client that he or she seek the advice of an independent attorney before proceeding. The practical effect of this requirement may be to push the client toward a nonattorney vendor for the service.

There may be another latent issue here. If, by this definition, services previously thought to be part of the practice of law are no longer regarded as such, will they be covered by malpractice insurance, which appears to be limited to the practice of law? Indeed, the charter of some providers appears linked to practice of law.

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