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July 3, 2003

Nonlawyers Still Closed Out of N.C. Closings, Except for Ministerial Tasks

Filed under: pre-06-2006 — David Giacalone @ 3:28 pm


Ethical Lawyering Today reports that “the North Carolina State Bar has dropped a prior requirement that a lawyer be physically present at all real estate closings, announcing that a lawyer-supervised nonlawyer may handle closings.” (Early July, 2003 edition)


According to the N.C. State Bar 2002 Formal Ethics Opinion 9 (Jan. 24, 2003), a nonlawyer supervised by a lawyer may present and identify the documents that must be signed in a real estate transaction closing, point out where signatures are needed, assure they are properly signed, and handle receipt and disbursement of closing funds.


Indeed, per the simultaneously released N.C. State Bar Authorized Practice Advisory Opinion 2002-1 (Jan. 23, 2003) (“Opinion 2002-1”), a nonlawyer unsupervised by a member of the N.C. bar may also perform those basically ministerial duties as a “closer.”


However, Opinion 2002-1 reiterates that a nonlawyer may not “handle” a residential real estate closing for one or more of the parties to the transaction, as most of the tasks involved are deemed by statute to be the practice of law.


So, the N.C. State Bar did back down somewhat from two prior ethics opinions after “a year of study,” and apparently gave some consideration to a joint FTC/DOJ letter objecting to the prior opinions. But, it did not go as far as recommended by the federal agencies in allowing lay “closers” not supervised by lawyers to handle real estate closings — especially those involving refinancing rather than the purchase of property.



Among other points, the FTC & DOJ stated in their Letter that prohibiting lay closers would (a) injure consumers who prefer the package of services, convenience and cost offered by nonlawyers, and (b) be likely to raise attorney closing costs by preventing competition.  The agencies pointed out that “The use of lay closers has reduced costs to consumers in other parts of the country.” They also referred to a 1995 action by the New Jersey Supreme Court that, after a 16-day investigatory hearing, rejected an ethics opinion that would have eliminated lay closings.


Citing both a N.C. Supreme Court decision and the New Jersey decision, the agencies explained that the conclusion as to whether particular activities amount to the unauthorized practice of law must be based on the “ultimate touchstone” of the public interest, and that “In determining how best to protect the public interest, the Committee should balance the harm that would be caused by banning lay settlements against the harm that might be caused by permitting them.”


In footnote 2 of Opinion 2002-1, the N.C. State Bar sheepishly points out that it is the State General Assembly and the Supreme Court that ultimately decide what constitutes the practice of law.   Before we absolve the organized bar from any responsibility, however, we need to know what role it played in having the expansive definition of unauthorized practiced passed into law.


ethicalEsq?‘s Editor humbly opines that it is part of the profession’s duty to consumers of legal services and the legal system to:



  • stop lobbying for laws that prevent competition from nonlawyers in situations where there is no record of significant harm to consumers — especially where informed consumers can make their own cost-benefit analysis concerning the choice between lawyers and lay providers.
  • seek the repeal of anticompetitive laws, rules and ethics opinions already on the books that unnecessarily prevent the entry of lay competitors and thereby harm the public interest; and
  • help inform consumers of alternatives that can serve their needs at lower cost, while objectively helping them make smart choices when choosing between different levels and sources of legal services.

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