State Superior Court Reaffirms Attorneys’ Role In Real Estate Closings

Published on: November 22, 2001

It’s been about eight years since the Massachusetts courts considered whether entities other than attorneys should be allowed too conduct real estate closings. But the court’s thinking on the issue has not changed. Reaffirming a long-standing, and well-entrenched judicial view, a Suffolk Superior Court justice ruled recently that a company providing closing services for lenders was engaged in the unauthorized practice of law.

The Massachusetts Conveyancers Association (which has fought this battle successfully before) filed the suit, in conjunction with seven local bar associations, against Colonial Title & Escrow. The suit contended that the Rhode Island corporation violated state law by providing an array of legal and title preparation services that are legal in nature and, therefore, must be provided or overseen by licensed attorneys. (Massachusetts Conveyancers Association et al, vs. Colonial Title & Escrow, Inc. et al. (Civil Docket # SUVC 1996-027746-B).

Forbidden Practices

The court agreed, issuing an order prohibiting Colonial from doing essentially everything the company was doing, including:

Evaluating real estate titles;“Preparing, drafting or reviewing legal documents affecting title to real estate or the obligations of parties to real estate transactions”;Explaining closing documents;Issuing title certifications or title insurance policies based on Colonial’s evaluation of the title; andRepresenting lenders as their closing agents.

The facts of the case should be familiar to anyone who remembers the 1993 suit the conveyancers filed against Closings.Ltd., which produced the same conclusion – in Massachusetts, attorneys handle real estate closings.  (Massachusetts Association of Bank Counsel, Inc. v .Closings.Ltd., Mass.L.Rptr.87 (Mass. Super 1993). This requirement makes Massachusetts different from most other states (xx of them, in fact), in which escrow companies or title companies routinely oversee the closing process and have done so for years.  In Massachusetts, however, the courts have maintained consistently that attorneys must be an integral part of real estate transactions. While critics contend that the courts are concerned primarily about protecting the turf of conveyancing attorneys, the courts in this case, as in the Closings.Ltd case, have framed the issue largely in consumer protection terms.In the Colonial decision, Superior Court Justice S. Jane Haggerty describes in great detail all the tasks attorneys perform when conducting closings and issuing titles, emphasizing the legal nature of that work, and pointing out that Colonial’s non-attorney representatives performed the same tasks when they conducted closings or issued titles for lenders.

Not in Massachusetts

“In Massachusetts, there is no long-standing practice permitting companies like Colonial to conduct closings,” she argued. “Nor does the public interest require that they do so. To the contrary, the public interest demands that legal interpretation and advice be given by attorneys who are trained to do so.” And the “public,” she added, includes lenders as well as borrowers, both of whom rely on the information and opinions closing attorneys provide.

In the closing context, she said, Colonial representatives act as the lender’s representative, “and the borrower may incorrectly look to him for legal advice or explanation.” Similarly, as the issuing agent for the lender’s title insurance policy, Colonial offers “opinion or advice” to lenders and to the title company, based on “the legal effect” of what the company has found in the title search.  That, too, constitutes the practice of law, Justice Haggerty said.

She rejected Colonial’s argument that the state law permitting the incorporation of title companies also allows Colonial to operate as an issuing title insurance agent. The law allows a title company to incorporate, Justice Haggerty said, but it does not allow the company to “practice or appear as an attorney for any person other than itself…or hold itself out to the public or advertise as being entitled to practice law….”

Having an attorney supervise Colonial’s title work (as the company began to do after this suit was filed) does not solve that problem, Justice Haggerty said. While a title company could hire Colonial’s supervising attorney directly, the title company “may not hire Colonial (which in turn hires the attorney) to conduct evaluations of title for purposes of issuing insurance.” Colonial itself is not a title insurance company, incorporated under Massachusetts law,” Justice Haggerty said. “It is an agent of title insurance companies which may be so incorporated.”

Change Isn’t Likely

Justice Haggerty’s opinion in this case is as clear and as unequivocal as the Closings.Ltd opinion. There is certainly no hint of any imminent shift in the judicial winds. Some suggest that the evolution of on-line mortgage transactions will eventually push attorneys out of the closing process, but that seems unlikely. Technology may make it easier for attorneys to play their traditional closing role, but it is unlikely to alter that role in any significant way.

If you are looking for a real estate lawyer in Massachusetts contact Meeb today.