Beware of Practicing Law
Lawyers are much like REALTORS® in that they want to "stay at the center of the transaction." With threats mounting on all sides, lawyers are becoming more protective of their domain. In fact, there is a national trend showing that the legal profession "will act forcefully to combat activity that could be construed as encroaching on its domain." Attorneys combat through lawsuits. Attorneys protect their own by seeking damages against parties (including real estate licensees), who cross the line when processing legal documents. So the question is, "where is the line?" Even the Utah Bar admits, "there is no bright line definition of what constitutes the practice of law." Therefore, each matter must be examined on a case-by-case basis.
Because the Utah Bar averages 86 "unauthorized practice of law" complaints per year, the UAR thought it would be appropriate to review what REALTORS® can and should do for their clients. Getting clients to the closing table, REALTORS® can fill out the real estate forms and documents. REALTORS® should not, however, try to draft side agreements, amend the legal language of the documents, interpret contract clauses, or represent the client to enforce compliance of the contracts.
For those of you interested in the exact language of the code, keep reading. Utah Code Annotated §78-51-25 states, in relevant part, that real estate licensees may participate in real estate deals, but cannot draft real estate contracts. Another part of the code, however, is more specific. UCA §61-2-20 sets forth the rights and privileges of real estate licensees. It states, "Real estate licensees may fill out only those legal forms approved by the commission and the attorney general, and those forms provided by statute, with the following exceptions: (1) Principal brokers and associate brokers may fill out any documents associated with the closing of a real estate transaction. (2) Real estate licensees may fill out real estate forms prepared by legal counsel of the buyer, seller, lessor, or lessee. (3) If the commission and the attorney general have not approved a specific form for the transaction, principal brokers, associate brokers, and sales agents may fill out real estate forms prepared by any legal counsel, including legal counsel retained by the brokerage to develop these forms." Utah Administrative Rule 6.2.1 sets forth the standards for REALTORS® filling out forms at closing. It states, "Principal brokers and associate brokers may fill out forms in addition to the standard state-approved forms if the additional forms are necessary to close a transaction. Examples include closing statements, and warranty or quit claim deeds." It continues, ". . . Any licensee may fill out forms prepared by the attorney for the buyer or lessee or the attorney for the seller or lessor to be used in place of any form listed in R162-6.2.1 (a) through (g) if the buyer or lessee or the seller or lessor requests that other forms be used and the licensee verifies that the forms have in fact been drafted by the attorney for the buyer or lessee, or the attorney for the seller or lessor." ". . . If it is necessary for a licensee to use a form for which there is no state- approved form, for example, the licensee may fill in the blanks on any form which has been prepared by an attorney, regardless of whether the attorney was employed for the purpose by the buyer, seller, lessor, lessee, brokerage, or an entity whose business enterprise is selling blank legal forms." ". . . There are Standard Supplementary Clauses approved by the Utah Real Estate Commission which may be added to Real Estate Purchase Contracts by all licensees. The use of the Standard Supplementary Clauses will not be considered the unauthorized practice of law."
In conclusion, every action you
take beyond filling out the approved documents increases your risk that you
will be sued. Looming out there, however, is a bigger threat than just being
sued. There are many states where state law requires that attorneys be used
to prepare and handle all real estate documents at closing. We don't
want that in Utah! The best way to avoid that threat is to make sure we do our
job well and leave lawyering alone. Not only is practicing law a violation of
Article 13 of the Code of Ethics, but who really wants to incur the wrath of
all those lawyer jokes out there? For questions or comments, call Chris Kyler,
UAR Director of Government Affairs and General Counsel, at 800-594-8933.
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