State Bar Issues Committee Reviewing Authorized Practice Opinion Lawyers Encouraged to Report Harm from Unauthorized Practice of Real Estate Law

Article Date: Saturday, June 11, 2011

Written By: Ben Kuhn

Since the adoption of APAO 2002-1 approximately 10 years ago (regarding the role of laypersons in real estate closings) many Real Property Section members have been increasingly concerned about the numerous and varied instances of unauthorized practice of law in connection with residential real estate closings by settlement shops, title agencies, and lenders. Some with an interest creating new business ventures have pointed to this advisory opinion in arguing that North Carolina law changed to allow non-lawyers to close real estate transactions in this state.

In reality, however, the State Bar did not – and cannot – change any law to allow non-lawyers to handle real estate transactions and certainly did not do so when adopting APAO 2002-1. Nevertheless, misinterpretations by those with an interest in starting closing shops in North Carolina have led to numerous non-attorney closing operations throughout the state.

The State Bar in January 2011 established a new “Issues Committee” tasked with the job to evaluate, review, and if needed based on demonstrated harm caused to consumers, to revise APAO 2002-1 and clarify existing law in North Carolina which requires that lawyers handle real estate closings for consumers (with limited exceptions where a non-lawyer party has a primary interest in the transaction). The chair of the new Issues Committee is Joseph Maddrey of Eden. Other members of the committee include Sally Scherer, Ron Baker, David Long, Lee Farmer, John Silverstein, David Sumpter, and Barbara Christy.

One of the State Bar’s functions is to protect the public from harm caused by unlicensed and untrained individuals and companies practicing law and providing legal services to consumers. The Issues Committee is currently receiving information as to the size of the problem and the cumulative effects of the harm caused by UPL. This record of consumer harm is needed to help justify further action by the Issues Committee and the State Bar in general. The Issues Committee met in April 2011 and heard several examples of consumer harm and the problems in the market in general arising from UPL.

If you have any examples where consumers (clients or lenders) suffered real and demonstrable harm (increased expenses/lost property rights/etc) as a result of non-lawyers conducting real estate closings please take 30 minutes to prepare and send a 1-2 page letter to the Chair of the State Bar Issues Committee Joseph Maddrey, briefly outlining (i) the transaction, (ii) the role of the non-attorney handling the transaction, and (iii) the actual consumer harm caused by the conduct of the non-attorney handling the transaction. Attach documents if available to show the fees charged and harm caused. If necessary, the folks involved can be made anonymous if you need to protect confidentiality. Instructions for sending such letters are included below.

Again, the most important part of any letters to Maddrey and the Issues Committee is to emphasize the actual harm/damage/increased costs caused by unlicensed person practicing law. Even lenders and title companies are part of the equation. Lenders who may have lost their ability to foreclose amounts to serious consumer harm as the lenders will pass that cost on to the public in general.  
If there are others in your office, or other colleagues in your town or city who have had similar experiences please pass this request along to them.

To send a letter to the chair of the State Bar Issues Committee please address it as follows:

Joseph Gordon Maddrey
Maddrey Etringer Smith Hollowell & Toney LLP
P.O. Box 507
Eden, NC 27289-0507

Ben Kuhn is the managing member of The Kuhn Law Firm, PLLC, located in Raleigh. Ben focuses his practice on real estate, land use, consumer protection, business, administrative law, and litigation. Ben also represents the North Carolina Bar Association Real Property Section as Consumer Protection Attorney.

Views and opinions expressed in articles published herein are the authors' only and are not to be attributed to this newsletter, the section, or the NCBA unless expressly stated. Authors are responsible for the accuracy of all citations and quotations.