Spring 2007 - #11. Arguments Against Specialty Certification.

Author:by Roger E. Kohn, Esq.

Vermont Bar Journal


Spring 2007 - #11.

Arguments Against Specialty Certification


Arguments Against Specialty Certificationby Roger E. Kohn, Esq.

At the meeting of December 12, 2006, it was agreed that Andy Mikell would circulate a memorandum concerning the advantages of real estate specialty certification, and that I would circulate a memorandum regarding the reasons not to have such a certification process. This memorandum is in response to that charge from the Committee. Certification Is Not the Solution to the Perceived Problem

Several reasons have been proposed for establishing a certification process. First, it has been suggested that such a certification will increase the public's awareness of the need for attorneys in real estate transactions, thereby slowing any movement to exclude attorneys from the real estate settlement process. Second, there is a suggestion that a certification process would assist the public in knowing which attorneys are most qualified to handle real estate transactions. Third, there is a suggestion that a certification process would increase the level of competence of practitioners. Fourth, there is some question whether malpractice insurers would provide a better rate for those who had received such certification. Finally, a rumor has been circulated that title insurance companies would provide some type of additional insurance, either on underwriting issues or as bonding to prevent defalcation, for those attorneys with such certifications. I will address each of these issues in turn.

1. Slowing the Movement to Exclude Attorneys

In Vermont, both real estate sellers and buyers have traditionally been represented by attorneys. Closings (i.e., preparation of settlement statements, disbursement of funds, signing of documents at the closing table) were initially handled by bank officers, but in recent years it has been more common for attorneys to handle closings. Vermont practice is quite different from that used in many states, where attorneys are often not involved in real estate transactions.

Because Vermont procedure is so different from other states, and because of perceived cost-saving measures, there have been various attempts to remove attorneys from the process, particularly in the setting of loan refinancing. I will defer to Andy Mikell as to the threat to attorneys and clients represented by these pressures, and as to the scope of the danger they present. However, there has been no explanation why having certified real estate specialists will slow this trend, and I do not believe it will.

2. Assisting the Public in Finding Knowledgeable Attorneys

I do not believe that the public would be better served by a real estate specialty certification process. As discussed below, this process is likely to increase the cost of real estate transactions because of the anticompetitive effect of such certifications. To the extent there are attorneys without the requisite knowledge to handle real estate transactions, I suggest that most attorneys recognize their limits, and that the title insurance companies can exercise substantial control over competency issues, as also discussed below.

Moreover, unless most attorneys qualified to practice real estate obtain this certification--which I think is very unlikely--I am not convinced that those attorneys who would apply for certification would be those who are most thorough, careful, and willing to spend time on individual transactions.

If people or organizations do not believe that an attorney is needed to represent them in real estate transactions, or believe that attorney representation is unduly expensive, the fact that there are attorneys who are real estate specialists will not cause them to change their minds and hire attorneys. In fact, specialization may have the opposite effect: if an out-of-state lender or other entity thinks its options are to avoid attorneys or to use a specialist attorney for...

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