Local conveyance attorneys may find their roles significantly reduced in real estate closings after a recent decision by a federal court judge.
Judge Joseph Tauro of the U.S. District Court in Massachusetts ruled that lawyers aren’t needed to issue title insurance, conduct title searches, or prepare closing documents – and laws that require them are unconstitutional.
The ruling was made after the Real Estate Bar Association for Massachusetts sued National Real Estate Information Services in 2006, arguing NREIS’s conveyancing business amounted to the unlawful practice of law.
NREIS successfully counterclaimed that REBA’s attempt to bar its business practices violated the Dormant Commerce Clause in the U.S. Constitution.
Precedent established that conveyancing falls under the practice of law. However, Tauro ruled that REBA’s interpretation of conveyancing, which it defined as an “interconnected series of activities that must be performed to convey the various legal interests in the real estate,” was too broad.
Tauro ruled that broad definition hurt interstate commerce by preventing out of state non-lawyers from doing things not considered the practice of law, and therefore was unconstitutional.
Stephen Edwards, president of REBA, said that these practices are not just filling out paperwork; the entire transactional process is the practice of law.
“When you understand the legal principles that are being applied in the transaction, you’re in a much better position to appropriately respond to the specific peculiarities that arise in any transaction,” Edwards said. “There is always a wrinkle.”
Michael Ricciuti, a partner at K&L Gates, the firm that defended NREIS, said the whole point of REBA’s lawsuit was to put companies like NREIS out of business in states like Massachusetts and Connecticut, which is unconstitutional discrimination.
“This was a suit brought against us to either drive us out of business entirely, or completely change [our] business model, and frankly, the business model for the entire industry,” Ricciuti said. “When all is said and done, I think this opinion stands for competition.”
Edwards said REBA’s lawsuit was not a matter of economic protectionism; it was a matter of professionalism and consumer protection.
“It’s not so much an issue of cost to the consumer, but the professionalism and accountability of the lawyer,” Edwards said. “Nobody is getting rich off these transactions.”
Edwards declined to comment on REBA’s next move, citing strategic reasons. He did say it was reviewing its case closely, and will make a decision on how to proceed soon.
