Real Estate Transactions
The Lawyer’s Role – Week 1
– It is the unauthorized practice of law for persons other than S.C. lawyers to:
o Prepare legal instruments
§ “The reason preparation of instruments by lay persons must be held to constitute the unauthorized practice of law is not for the economic protection of the legal profession. Rather, it is for the protection of the public from the potentially severe economic and emotional consequences which may flow from erroneous advice given by persons untrained in the law.”
o Review titles (except to prepare for use by attorneys)
o Conduct closings (and provide advice during)
§ In Re Lester (footnote I pg. 8)
· Paralegal closing on behalf of attorney when attorney was not in town but available by phone is contrary to Buyers Service requirement that attorney supervise the closing.
· Found professional misconduct and public reprimand was required
o Record legal instruments
Wachovia Bank v. Coffey
– Terminally ill husband takes equity line loan on house owned by him and his wife without the knowledge/consent of his wife to purchase a boat
– Wachovia is unable to collect because the doctrine of unclean hands precludes recovery, because Wachovia had prepared a mortgage loan, and conducted a closing without the review of an independent S.C. attorney
o “The unauthorized practice of law is inherently prejudicial to not only the parties involved in the instant transaction but also to the public at large”
Doe v. McMaster
– Refinancing is treated the same as purchase of new property (Buyers Service rules apply)
o Title search, and document preparation for lenders (not a buyer) still requires an S.C. attorney
o An independent attorney can represent both parties after giving full disclosure of his role and obtaining consent from both parties
§ Attorney cannot represent another client if the lawyer believes the representation will not adversely affect the relationship with either client, and both clients consent
· Ethical concerns only applicable when business relationship exists between Lender and Attorney (FN 6)
Doe v. Richardson
– “The disbursement of funds in the context of a residential real estate loan closing cannot and should not be separated from the process as a whole”
o Must be supervised by an attorney, but doesn’t require using trust acct
Mali v. Odom
– Mali buys property to build a school but is prevented from doing so because of existing restrictive covenants and sues lawyer for malpractice.
o Odom and Mills testify that Odom brought up the restrictive covenants at closing, but Mali’s testimony is contradictory
o “When you give advice, reduce it to writing” – Spitz
In Re Brown
– Law student conducted some closings when there was no licensed S.C. attorney on the premises, and routinely signed as witness to documents relating to closing he was not present.
o “For the purpose of protecting the public’s trust in the legal system it is likewise the Court’s duty to discipline an attorney for misconduct which precedes his or her admission to the practice of law.
– Brown also allowed firm clients to assume he was a licensed attorney when he was not.
o Court held this to be actively participating in the unauthorized practice of law
Role of the Broker- 3 key questions
1) What type of agency does the broker have?
· Open Agency- non-exclusive right and anyone can sell; not very common
· Exclusive Agency- broker has exclusive right to market and sell, but broker won’t get commission if the owner sold it on his/her own.
· Exclusive Right to Sell- exclusive right to sell and market, and no matter how it’s sold the broker can get a commission.
o Most favorable document and most common
· Dual Agency- broker represents both the buyer and the seller. The broker
o Requirements for Writing – more than a “mere” writing
§ the name of the contracting parties
§ valid description of the property
· make sure there is a location
· date to close
· full name of the parties
· title satisfactory to the buyer
· a meeting of the minds and legal consideration
o Speed v. Speed
§ case about the drug store in Abbeville
§ don’t care about the form of the writing
§ Evidence is critical
§ our courts will accept multiple letters, emails, etc as parole evidence to “connect up”
§ most of these cases turn on evidence of what the parties actually agreed on
“the store’’ was not a sufficient description BUT court found that “the Speed Drug Store property” in the second letter added together with the first document was sufficient description
o Lucy v. Zehmer
§ We hereby agree to sell to W.O. Lucy the Furguson Farm complete for $50,000 title satisfactory to the buyer” (signed by A.D. Zehmer and his wife)
§ This one sentence was found sufficient to form a contract
§ Arguments for why this isn’t enough? What else is needed?
· The description of the property – where is it? What are the boundaries?
· No complete names
o Form is not material (can be written on a napkin) Speed v. Speed
· Look at writing(s) as a whole – there can be more than one writing, just needs to both be signed
· Parole Evidence Rule : only where the subject of the offer is first clearly established in the writing may parole evidence then be admissible to further explain the property