I’ll be speaking at the meeting of the ALI-ABA Land Use Institute on August 17-19.  The meeting takes place at the Massachusetts Continuing Legal Education (MCLE) Conference Center at 10 Winter Place in Boston.  Topics include:  an update on planning and land use decisions, where I’ll be discussing condition uses and nonconforming uses; and federal laws and regulations

The Supreme Judicial Court’s decsion in REBA v. NREIS (pdf) may not have fully answered the two questions the First Circuit certified, but the guidance the SJC did provide may make it difficult for out-of-state companies to continue selling “settlement services” in Massachusetts.  As described in this prior post (and in more detail in the SJC’s decision), the defendant, National Real Estate Information Services, Inc. (NREIS) – a Pennsylvania company – contracts with a Massachusetts company to examine the titles of properties on which NREIS’s lender clients plan to take mortgages.  That company provides NREIS with an abstract of the title.  NREIS obtainshit the road, Jack appraisals, municipal lien certificates and other documents concerning the property, and prepares HUD settlement statements.  If one of its clients asks NREIS to furnish a deed for the transaction, NREIS contracts with a Nevada company called “DeedPro” to prepare the deed.  When all the documents are ready, NREIS hires a Massachusetts attorney to attend the closing, witness the signing of the documents, and then gather up the completed paperwork and send it back to NREIS.  

Given the limited summary judgment record before it, the SJC could not fully answer the First Circuit’s questions, which were (1) whether NREIS’s activities “either in whole or in part” constitute the unauthorized practice of law in violation of M.G.L. c. 221, §§ 46, et seq., and (2) whether, in particular, NREIS’s hiring of Massachusetts attorneys to attend closings constitutes the unauthorized practice of law under that statute.  However, in addressing these questions to the extent it could, the SJC made several key points which, taken together, suggest that NREIS’s business model is no longer viable in Massachusetts. 

In response to the First Circuit’s first question, the SJC stated, “clearing title may involve the practice of law and interpreting the legal status of a title certainly does do so.”  The record does not reveal who, in NREIS’s business model, evaluates the quality of the mortgagor’s title, and advises NREIS’s lender clients in that regard.  NREIS can’t lawfully do so itself, nor can its non-attorney title examination company.  The record indicates that the Massachusetts attorneys that NREIS hires to attend closings also don’t evaluate title — in fact, it’s possible they never even see the abstracts that the title company prepares.  If not NREIS, or the title company, or the attorneys that NREIS hires, then who does evaluate the quality of the titles on which NREIS’s clients rely as security for their loans?  The answer to this question may lie in deposition testimony given by an NREIS representative, who apparently testified that he understood the non-lawyer title company to be performing a “plenary search” of the title and “establishing that there is clear title to the property.”  About this the SJC stated, rather ominously, “[t]his description implies, despite NREIS’s express assertions to the contrary, that NREIS relies on [the title company] to furnish a form of legal opinion about title to its lender clients.”  On the related subject of drafting deeds, the court noted, “[b]ecause deeds pertaining to real property directly affect significant legal rights and obligations, the drafting for others of deeds to real property constitutes the practice of law in Massachusetts.”  

In addressing the First Circuit’s second question, the SJC observed that a real estate closing is “a critical step in the transfer of title and the creation of significant legal and real property rights.  Because this is so, we believe that a lawyer is a necessary participant at the closing to direct the proper transfer of title and consideration and to document the transaction, thereby protecting the private legal interests at stake as well as the public interest in the continued integrity and reliability of the real property recording and registration systems.  In other words, many of the activities that necessarily are included in conducting a closing constitute the practice of law and the person performing them must be an attorney.”  (emphasis supplied).  Then the court sounded what may be the death-knell for NREIS’s business model:

Implicit in what we have just stated is our belief that the closing attorney must play a meaningful role in connection with the conveyancing transaction that the closing is intended to finalize.  If the attorney’s only function is to be present at the closing, to hand legal documents that the attorney may never have seen before to the parties for signature, and to witness the signatures, there would be little need for the attorney to be at the closing at all.  We do not consider this to be an appropriate course to follow.  Rather, precisely because important, substantive legal rights and interests are at issue in a closing, we consider a closing attorney’s professional and ethical responsibilities to require actions not only at the closing but before and after it as well.

Returning to its earlier point, the SJC added, “[t]he lender’s closing attorney has a responsibility to his or her client to ensure that the seller . . . or borrower-mortgagor . . . is in a position to convey ‘marketable title’ to the real property at issue.”  Because making this determination constitutes the practice of law in Massachusetts, it “typically must be performed by an attorney prior to the execution of the mortgage documents at the closing, and also prior to recording them.  We emphasize that the closing attorney possesses an ethical and professional obligation to ensure marketability of title regardless of whether the closing attorney personally performs this analysis.”  (emphasis supplied).

Continue Reading Is SJC Decision Enough to Send NREIS Packing?

The Supreme Judicial Court (SJC) this morning issued its decision (pdf) in Real Estate Bar Association, Inc. v. National Real Estate Information Services, a case that presents important issues involving the unauthorized practice of law and the ability of companies such as the defendant to “facilitate” real estate closings.  The case is described in this previous post.  The First

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