The Real Estate Bar Association’s fight to keep closings in the hands of attorneys got a big boost today in the form of a ruling from the Massachusetts Supreme Judicial Court in its suit against National Real Estate Information Services (NREIS).
The SJC had been asked by a federal appeals court to clarify two points about the practice of law in Massachusetts in relation to closings. In a lengthy and complex ruling, the SJC said it didn’t quite have enough information about NREIS’s practices to answer whether what it was doing counted as the practice of law, but it provided a definition of an attorney’s responsibilities which fell neatly in line with REBA’s arguments.
"I think this is immensely helpful because it reaffirms that what we’ve been arguing all through this process, that an attorney has to play a meaningful part in the closing," said Doug Salvesen, a partner at Yurko, Salvesen & Remz, who helped argue the case for REBA.
In 2008, REBA filed suit against NREIS, arguing that the suite of closing and title insurance services offered by the company, including hiring contract attorneys to attend closings, amounted to the illegal practice of law.
REBA had initially filed suit in Massachusetts state court, but NREIS successfully moved to have the fight moved to federal court, since it was not a Massachusetts-based company. Once in federal court, NREIS filed a motion for summary judgment – essentially suggesting that the law was so clearly in their favor that the case need not move to a full trial – which the federal district court judge granted.
REBA appealed, and the Appeals Court ruled in their favor, saying that there were substantive questions to be answered. But it also said that existing Massachusetts law was a little unclear on some key points at stake in the case, and requested the Massachusetts Supreme Judicial Court answer two questions about whether NREIS’s actions constituted the practice of law in Massachusetts.
In attempting to answer those questions, the SJC appears to have been somewhat flummoxed by the relative paucity of concrete information in the record. Because the case never went to trial, few witnesses had been examined, and few documents produced which could shed light on the two side’s conflicting claims about NREIS’s practices.
"In light of the fact that we cannot discern from the record the precise nature of the information NREIS provides to its lender clients, we are not able to answer with any degree of confidence whether the services that NREIS, and third parties retained by NREIS, provide to lenders in connection with title examinations encroach impermissibly on the practice of law and thereby qualify as unauthorized legal practice," it says in the ruling.
But it did state that "the closing attorney must play a meaningful role in connection with the conveyancing transaction that the closing is intended to finalize," and that "[an attorney’s] professional and ethical responsibilities require actions not only at the closing but before and after it as well."
"They’ve given a pretty clear map of what they think a closing is, and what you have to do to comply with Massachusetts law," said Salvesen.
The SJC decision states that writing a deed, initiating court proceedings to attempt to clear title or offering legal advice on whether a title is clear would constitute practicing law, while merely compiling land or other records that pertain to a title, writing a title insurance policy or recording documents and distributing funds following a closing would not constitute the practice of law. It also states that it’s an attorney’s responsibility to advise his or her client on whether a title is clear.
"The SJC affirms the [Massachusetts Bar Association]’s long-standing position that it is essential that attorneys be actively involved in real estate closing transactions," said Martin W. Healy, chief legal counsel of the Massachusetts Bar Association. "The interests of private clients and the public alike are safeguarded when an attorney participates in real estate conveyancing."
But the court remained uncertain as to NREIS’s actual business practices with respect to several of these points, saying for example that while there wasn’t any specific evidence in the court record to suggest that NREIS was writing deeds, "we are unable to make a more definite or general determination," as to whether their deed services were acceptable.
The case will now return to the federal appeals court, and will likely be sent back down to trial court to gather the additional evidence about NREIS’s practices, Salvesen said.
NREIS declined to comment.
