Massachusetts Supreme Court Analyzes Activities of National Title Vendor as Possible Unauthorized Practice of Law

On April 25, the Supreme Court of Massachusetts decided Real Estate Bar Association for Massachusetts v. National Real Estate Information Services, 459 Mass. 512 (Mass. 2011), which addressed claims of unauthorized practice of law in Massachusetts real estate conveyancing. The court concluded that certain real estate settlement activities undertaken by the defendants, National Real Estate Information Services (NREIS), did not constitute the unauthorized practice of law, but also stated that based on the record before the court, it could not determine whether other settlement activities constituted the unauthorized practice of law.  The court acknowledged the impossibility of a comprehensive definition of the practice of law, but stated "[t]he practice of law involves applying legal judgment to address a client’s individualized needs."

The plaintiffs, the Real Estate Bar Association for Massachusetts (REBA), an association of real estate lawyers, sued the defendants, a real estate settlement services provider and title insurance agency, on the grounds that the defendants engaged in the unauthorized practice of law.  The defendants described the activities as facilitating mortgage transactions for its lender clients, services it claims are "managerial, administrative, clerical or ministerial."

Mortgage transactions are conveyancing transactions in Massachusetts. Conveyancing, according to the Black’s Law Dictionarydefinition cited by the Court, is the act or business of drafting and preparing legal instruments, especially those that transfer an interest in real property. However, the Court rejected the notion that "conveyancing" is a unitary, indivisible activity. "Many of the discrete services and activities that may fall within the penumbra of modern conveyancing do not qualify as the practice of law."

Among the activities held not to be the practice of law in this decision are: (i) conducting title examinations and preparing title abstracts, (ii) obtaining public records such as municipal lien certificates, property appraisals and flood reports, (iii) preparing HUD-1 settlement statements, (iv) reviewing mortgage loan documents to ensure valid execution, (v) delivering documents to the registry of deeds for recordation, (vi) disbursing mortgage loan proceeds, and (vii) issuing title insurance commitments and policies.

Activities that do constitute the practice of law include providing opinions or advice regarding marketability of title to real estate and drafting deeds to real property.

Activities that may or may not constitute the practice of law include clearing title defects and placing oneself as an intermediary between attorney and client or facilitating the relationship between attorney and client.

The Court reconfirmed the established practice in Massachusetts that an attorney must conduct real estate closings in the state. "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 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...." Moreover, the attorney must do more than simply appear at the closing; he or she must "play a meaningful role" in the closing because of his professional responsibility to ensure (1) that marketable title is conveyed, and (2) that the consideration for the conveyance is transferred.