Bulletin: RI2020004

Dear Associates:

On May 29, 2020, the Rhode Island Supreme Court issued its opinion addressing three cases which alleged that non-attorney closing agents engaged in the unauthorized practice of law. In Re Paplauskas (No. 2018-161-MP), et al. The Court was charged with determining, in the context of a residential real estate transaction, which acts or components of the closing process constitute the practice of law. A copy of the decision may be reviewed by clicking here.

In its decision, the Court considered the following five activities in order to determine those which may be undertaken by a non-attorney, and those which must be performed by a licensed Rhode Island attorney: (1) conducting a residential real estate closing; (2) examining a title for marketability; (3) drafting a deed; (4) drafting a residency affidavit; and (5) drafting a durable power of attorney.

The Court recognized the common practice of title insurance companies and their agents to conduct closings in conjunction with the issuance of a title insurance policy, and determined that they may continue to conduct closings in accordance with the Rhode Island Title Insurers Act, Rhode Island General Laws 27-2.6. It is important to note that the holding is limited to the extent that the activity is carried out in connection with the issuance of title insurance, and the closing agent limits his or her activities when conducting a closing to functions such as identifying a document, directing a party where to sign, and delivering copies of the signed documents for execution. Further, the Court acknowledged that aspects of a real estate transaction which occur prior to or at closing, may involve giving legal advice. To that end, the Court held that a non-attorney closing agent must disclose in writing to both buyer and seller that:

(1) the closing agent is not an attorney; (2) he or she does not represent the buyer or the seller; (3) he or she cannot and will not give legal advice; and (4) if the buyer or seller has a legal question, the buyer or seller should suspend the closing and seek counsel from an attorney. The disclosure must be signed and acknowledged by both buyer and seller, the closing agent must execute the disclosure to acknowledge that he or she has explained the notice to the parties, and copies of the executed form must be provided to both parties as well as retained by the closing agent.

In addition to finding that non-attorneys may conduct closings provided the required disclosures are made and the non-attorney does not exceed the parameters of the permissible activities outlined by the Court, the Court also found that non-attorneys may draft the residency affidavit pursuant to R.I.G.L. § 44-30-71.3 and limited durable powers of attorney. In its decision, the Court described both acts as being ancillary activities that the Title Insurers Act authorizes title insurance companies and their agents to perform when they are issuing title insurance and in both cases, described the acts involved as the completion of form documents. The Court specifically held that drafting a general power of attorney fell within the purview of the practice of law and emphasized that a non-attorney who drafts a power of attorney which is not limited to effectuating the contemplated purchase and sale transaction is engaging in the unauthorized practice of law.

There are two components of the closing process which the Court did determine constitute the practice of law. Specifically, drafting deeds and the examination of title for marketability are both deemed to be the practice of law and must be undertaken by a licensed Rhode Island attorney. In coming to this conclusion, the Court describes the deed as being the most important document in the real estate closing process which not only memorializes the transfer of title but defines the tenancy and property interest being conveyed. Therefore, the drafting of a deed requires legal knowledge and expertise which must be done by an attorney. Likewise, the Court found that the determination as to the marketability of the title also requires legal knowledge in order to adequately ensure the protection of a buyer in the real estate transaction and must be completed by a licensed attorney engaged or employed by the title insurance company or issuing agent.

In light of these recent developments, all Rhode Island policy issuing agents must review and update their practices and written disclosures, as necessary, to ensure compliance with the Court’s decision.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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