A Summary of the Rhode Island Supreme Court’s Opinion Regarding Real Estate Transactions and the Unauthorized Practice of Law, 1020 RIBJ, RIBJ, 69 RI Bar J., No. 2, Pg. 17

PositionVol. 69 2 Pg. 17

A Summary of the Rhode Island Supreme Court’s Opinion Regarding Real Estate Transactions and the Unauthorized Practice of Law

Vol. 69 No. 2 Pg. 17

Rhode Island Bar Journal

October, 2020

September, 2020

On May 29, 2020, the Rhode Island Supreme Court released its opinion “as to what functions involved in a real estate closing may be performed by non-attorneys and which, if any, required efforts of an attorney licensed to practice law in [Rhode Island].”1 The high court was called upon to deliver such opinion after the Rhode Island Supreme Court Unauthorized Practice of Law Committee issued a report recommending the Court find that “(1) conducting a residential real estate closing; (2) examining a title for marketability; (3) drafting a deed; (4) drafting a residency affidavit; and (5) drafting a durable power of attorney” constitute the practice of law and be performed only by lawyers.2 The Court declined to adopt these recommendations.3

While the Supreme Court acknowledged that “parties to a real estate transaction are best served if they are represented by licensed attorneys” and “allowing such transactions to be conducted by non-attorneys exposes [the parties] to the possibility of harm,” the Court ultimately opined that non-attorneys who perform services associated with real estate transactions are not engaging in the unauthorized practice of law.4 This article is meant to summarize the Court’s opinion and to provide guidance regarding what is and what isn’t considered the “practice of law” in real estate transactions in light of the Court’s opinion.

There are five major activities involved in real estate transactions that the Court discussed in its opinion: (1) conducting residential real estate closings; (2) examining a title for marketability; (3) drafting a deed; (4) drafting a residency affidavit; and (5) drafting a durable power of attorney. With regards to conducting a real estate closing, drafting a residency affidavit, and drafting a limited durable power of attorney, the Court concluded that title insurance companies do not engage in the unauthorized practice of law by engaging in such business.[5] The Court did find, however, that such companies may only conduct title examinations “if a licensed attorney engaged or employed by the title insurance company conducts the examination.”6 It also found that drafting a deed constitutes the practice of law and “an attorney is required to either draft the deed or review it after it has been prepared.”7

Real Estate Closings

Real estate closings can be conducted by non-attorneys in conjunction with the issuance of a title insurance policy.8

The Supreme Court recognized that it is commonplace in Rhode Island’s title insurance industry for non-attorneys to conduct real estate closings and has been for a very long time.9 While many states have become “attorney-only” states, the Rhode Island Supreme Court decided not to follow suit, stating that “[r]equiring each party to be represented by an attorney would increase the transactional costs associated with purchasing a home” and arguing that increased competition would decrease the cost for consumers.10 The Court also acknowledged that they were not aware “of any widespread harm to the public” caused by allowing title insurance companies to conduct closings and that the Unauthorized Practice of Law Committee had not put forth any evidence of “real harm to the public.”11 Citing these policy considerations, the Supreme Court decided to continue to allow “title insurance companies and their...

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