Bulletin: VA000018

Dear Associates:

Effective July 1, 2002, the definition of Settlement Agent, in Virginia Code § 6.1-2.20, of the Consumer Real Estate Settlement Protection Act ("CRESPA") has been amended as follows:

"Settlement agent" means a person other than a party to the real estate transaction who provides escrow, closing or settlement services in connection with a transaction related to real estate in this Commonwealth and who is listed as the settlement agent on the settlement statement for such transaction. Any person, other than a party to the transaction, who conducts the settlement conference and receives or handles money, shall be deemed a "settlement agent" subject to the applicable requirements of this chapter.

The change applies when the party listed on the settlement statement as the settlement agent "subs" out the actual settlement conference, or if an attorney not registered under CRESPA conducts the settlement conference and receives or handles money. If the person conducting the settlement conference receives or handles money in any form, he/she must be either registered under CRESPA, or a bona fide employee of the Settlement Agent listed on the settlement statement, which must also be licensed under CRESPA.

Following are examples of the application of the statute. These should not be considered to be all-inclusive; please call counsel if you have questions about a particular situation.

1. If the person conducting the closing is a bona-fide employee of the settlement agent listed on the settlement statement then the parties are protected under the settlement agent's Fidelity Bond. This would be true no matter if the closing took place in the settlement agent's office or the employee went to the buyer/seller/borrower's home.

2. If the person conducting the closing is a "contract closer" or "sub-contractor," not covered under the settlement agent's fidelity bond coverage, then they would not be able to receive or handle any money, even if the funds are in check form made payable to the settlement agent.

3. If the person conducting the closing is a witness/notary hired only to get signatures of the parties to the transaction, they would be able to 'witness' and 'notarize,' but not receive or handle any money. Again, they would not be allowed to accept funds, even if in check form made payable to the settlement agent.

Violations of this code section would possibly subject the CRESPA registered settlement agent and the witness/notary to penalties up to a $5,000 fine and suspension or revocation of their title insurance license.