SC Lawyer, Nov. 2003, #8. Cutting through the issues on UPL in real estate closings.

• Author: By Christine Mayhew and Herb Hamilton

South Carolina Lawyer

2003.

SC Lawyer, Nov. 2003, #8.

Cutting through the issues on UPL in real estate closings

South Carolina LawyerNov. 2003Cutting through the issues on UPL in real estate closingsBy Christine Mayhew and Herb HamiltonIssues related to the definition of the practice of law have been debated in South Carolina for nearly a hundred years. See In Re Duncan, 83 S.C. 186, 65 S.E. 210 (1909). The recent history of efforts to define the practice of law begins with South Carolina v. Buyers Service Co., 292 S.C. 426, 357 S.E.2d 15 (1987). Buyers Service, a title company, prepared loan documents and title abstracts, conducted residential closings and recorded documents for residential home purchasers. South Carolina sued Buyers Service alleging that its actions constituted the unauthorized practice of law (UPL), and the South Carolina Supreme Court agreed.

The Court began its analysis by noting that the practice of law "includes conveyancing, the preparation of legal instruments of all kinds, and, in general, all advice to clients, and all action for them in matters connected with the law . . . The practice of law is not confined to litigation, but extends to activities in other fields which entail specialized legal knowledge and ability." Id. at 430, 357 S.E.2d at 17. The Court noted that the preparation of closing documents constitutes the practice of law, regardless of whether these forms are preprinted and reviewed by an attorney before they are executed. "The preparation of instruments, even with preprinted forms, involves more than a mere scrivener's duties." Id. at 431, 357 S.E.2d at 17. According to the Court, title examination, when done for the benefit of another, also constitutes the practice of law. Id. at 432, 357 S.E.2d at 18. The Court also concluded that recording of documents, if done in conjunction with a real estate closing, must also be handled by a licensed attorney. Id.

While acknowledging that many jurisdictions allow non-lawyers to conduct residential real estate closings, the Court was quick to point out that these jurisdictions have enacted strict guidelines non-lawyers must follow when conducting these transactions. Id. The Court felt that such guidelines might theoretically "protect the public from receiving improper advice," but noted that there is in practice no way of assuring lay persons will adhere to the restrictions." Id. at 434, 357 S.E.2d at 19. Therefore, the Court held that real estate closings must be conducted under the supervision of an attorney, voicing protection of the public as the Court's paramount concern.

In reaching these findings the Court relied heavily upon cases from other jurisdictions, including Washington State Bar Ass'n v. Great W. Union Fed. Sav. & Loan Ass'n, 586 P.2d 870 (Wash. 1978) and Arkansas Bar Ass'n v. Block, 323 S.W.2d 912 (Ark. 1959), cert. denied, 361 U.S. 836 (1959). In Great W. Union, the Washington Court held that a bank's completion of deeds, mortgages, deeds of trust and promissory notes in conjunction with a customer's real estate closing constituted the unauthorized practice of law. Id. at 916. See also Beach Abstract & Guar. Co. v. Bar Ass'n of Ark., 326 S.W.2d 900 (Ark. 1959) (holding that conducting a title search on behalf of another constitutes the practice of law) (cited in Buyers Services).

The reasoning supporting Great W. Union, Block and Beach has been modified and refined over time. At the time Buyers Service was decided, Block and Beach had been modified to allow non-lawyers to fill in the blanks on preprinted forms during a real estate closing. Creekmore v. Izard, 367 S.W.2d 419, 424 (Ark. 1963); see also Pope County Bar Ass'n, Inc. v. Suggs, 624 S.W.2d 828 (Ark. 1981) (reaffirming Creekmore's modification of Block).

Perkins v. CTX Mortgage Co., 969 P.2d 93 (Wash. 1999) essentially reversed Great W. Union and its progeny. In Perkins, the court held that a bank engaged in the practice of law by selecting and preparing certain legal documents necessary to close the Perkin's purchase of a home, but held that these actions were authorized: "Whether or not a fee is charged, lenders are authorized to prepare the types of legal documents that are ordinarily incident to their financing activities when lay employees participating in such document preparation do not exercise any legal discretion." Id. at 107. See also Rosemond v. Campbell, 288 S.C. 516, 343 S.E.2d 641 (Ct. App. 1986) (recognizing the common practice of preparation of loan documents by lenders).

In June of 1991, the South Carolina Bar Unauthorized Practice of Law Committee submitted to the Supreme Court a set of proposed rules regarding the unauthorized practice of law. See In Re Unauthorized Practice of Law Rules Proposed by the South Carolina Bar, 309 S.C. 304, 422 S.E.2d 123 (1992). The proposed rules represented "the Committee's collective wisdom accumulated during its thirteen years of existence." Id.

These rules took a more narrow view of what constitutes the unauthorized practice of law than did Buyers Service, expanding the conduct in which non-lawyers can engage. The Court declined to adopt these rules: "[W]e are convinced...