by Paul Avelar
As has been previously discussed here, the Rhode Island Supreme Court has been considering recommendations from its own Unauthorized Practice of Law Committee in three cases involving real-estate closings and related services. The Court has issued its decision, and it is mostly a victory for consumers.
To recap, for more than a century the Rhode Island General Assembly has allowed (licensed) title insurance companies and their agents to conduct real-estate closings and do several other things incidental to those closings. Over that time an entire industry has built up around real-estate closings, where regulated-but-non-lawyer individuals and regulated-but-not-law-firm companies provided cost-effective services to the public.
But the Rhode Island Supreme Court’s UPL Committee—which consists of 14 lawyers and one non-lawyer—recommended the Court simply ignore the General Assembly. Acting on complaints from real-estate closing lawyers about non-lawyers doing closings, the Committee recommended the Court use its “inherent” power over the practice of law to determine that real-estate closings were the practice of law such that only lawyers could do them, century-old statutes notwithstanding.
The Court’s decision jealously maintains its “ultimate and exclusive authority to determine what does and does not constitute the practice of law,” regardless of the General Assembly’s statutes. But the Court’s decision does attempt to focus on “public welfare” in making those determinations. Critically, this decision omits any mention of a “secondary” interest in “[a]ssuring protection to duly licensed attorneys and counsellors against invasions of their franchise by unauthorized persons,” which earlier cases did discuss.
In focusing on the public interest, the Court adopted several points recommended by Responsive Law and other groups like the FTC and the Institute for Justice. First, “[a]ctivities which, on a purely theoretical level, might be deemed to constitute the practice of law, may not be considered to be the practice of law in a practical sense unless it is in the public interest to require an attorney to perform these activities.” Second, “allowing title insurance companies and their agents to conduct closings benefits the public by increasing competition, which will result in decreased costs and potentially more choices as to how and where closings are conducted.” Third, and perhaps most critically, even though “the conducting of real estate closings by non-attorneys is commonplace in Rhode Island and that it has been commonplace for a very long time,” there was no evidence of any “widespread harm to the public occasioned by title insurance companies or their agents conducting closings.” Indeed, neither the Committee, nor the several amici that supported it—such as the Rhode Island Bar Association—“has come forward with evidence of real harm to the public. What they have pointed to are theoretical harms that might occur in the event that errors are made. From our review of how other jurisdictions have addressed this issue, this theoretical harm has not materialized.”
Based on these points, the Court determined that conducting a residential real estate closing, drafting a residency affidavit for the closing, and drafting a durable power of attorney for the closing are not the practice of law. The Court did determine that examining a title for marketability and drafting a deed is the is the practice of law that must be done or reviewed by a lawyer. But even here, the Court allowed that the lawyer could be an employee of the title company, rather than having to be a member of a law firm.
On the whole, this is a much better outcome for the people of Rhode Island than that suggested by the Committee. But there remains work to do because, as the Court noted, there are other states that continue to monopolize real-estate closings for lawyers, notwithstanding the public interest in more competition and the lack of any evidence that the lawyers’ monopoly protects the public.
Paul Avelar serves on the Responsive Law Policy Advisory Board. He is a Managing Attorney at the Institute for Justice.