The Massachusetts Supreme Judicial Court handed down on Monday its long-awaited ruling in the case of The Real Estate Bar Association for Massachusetts, Inc. (REBA) v. National Real Estate Information Services, Inc. (NREIS). The case revolved around whether NREIS, as an out-of-state non-attorney settlement service provider, was performing certain activities that would constitute the unauthorized practice of law.
REBA argued that NREIS’s business activites constituted the unauthorized practice of law in Massachusetts because NREIS was performing many of the functions that a licensed real estate attorney would perform in the process of transferring real estate. The SJC concluded that certain functions of conveyancing real estate, such as the preparation of title abstracts, preparation of settlement statements and other mortgage-related forms, recording documents and disbursing funds, and issuing title insurance policies, in and of itself, do not constitute the practice of law. However, “as a matter of common and long-standing practice in the Commonwealth, an attorney must be involved in the closing or settlement of real property conveyances…”
The SJC went on to state that the closing is a critical step in transferring title to property which creates significant legal and real property rights for the buyer. “Because of this, 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…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.”
The SJC went even further and stated that because there are substantive legal rights and interests at stake in a closing, the attorney’s role in the process is critical, not only at the closing, but before and after as well. What this means is “witness or notary closings” are not allowed.
NREIS and other non-attorney settlement service providers were contracting with licensed attorneys to simply attend the closing and witness and notarize the signing of the documents. The attorney was paid by NREIS a small fee for this service. However, the attorney had no involvement in the process otherwise and had no knowledge of the quality of title or the accuracy of the documents being signed. The SJC has determined that, because there are substantive legal rights and interests at stake in a closing, hiring contract attorneys for witness or notary closings violates the law.
It remains to be seen whether NREIS and other out-of-state non-attorney settlement service providers will change their business model to conform with the ruling in order to continue doing business in Massachusetts. Regardless, this is a long-awaited ruling from the SJC and a huge win for Massachusetts licensed attorneys as well as consumers.
To read the entire ruling, click here.
