FTC and Department of Justice Comment to the North Carolina State Bar Concerning Proposed State Bar Opinions Concerning Non-Attorney Involvement in Real Estate Transactions

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
Washington, DC 20580 DEPARTMENTOF JusnCE
Washington,DC 20530
July 11,2002
E. Fitzgerald Parnell ill
President, North Carolina State Bar
Poyner & Spruill LLP
100 North Tryon Street
Suite 4000
Charlotte, North Carolina 28202-4010
Re:
Proposed North Carolina State Bar Opinions Concerning
Non-Attornevs'InvolvementIn RealEstateTransactions
Dear Mr. Parnell
The United States Department of Justice and Federal Trade Commission urge the North
Carolina State Bar Council to adopt two opinions proposed by the Special Committee on Real
Estate Closings of the North Carolina StateBar: the Authorized Practice Advisory Opinion on
Real Estate Transactions and the Ethics Opinion in Responseto the FTC/DOJ Advocacy Letter
of December 14, 2001. The Ethics Opinion would permit lawyers to delegatereal estateclosing
tasks to their employees working under their supervision. Under the proposed Authorized
Practice Opinion, so long as non-lawyers did not give out legal advice, they would be authorized
to perform the ministerial functions of closing a real estatedeal: overseeing the execution of
documents and disbursementof funds. This Opinion will allow North Carolina consumersto
enjoy the fruits of competition between attomeys and non-lawyers: lower prices and more
choices in how and when closing services are provided.!
1 As we said in our December 14,2001 joint letter, parties should also be able to conduct their
closings unrepresented by counsel if they so choose. Any opinion declaring real estate closings to be the
practice of law has the potential to harm North Carolina consumers. We intended the views expressed in

North Carolinians are likely to pay lower prices for real estateclosings for at least two
reasons. First, consumerswho hire lay closers will likely pay less for closing than those who hire
lawyers. Second, consumers who hire lawyers will also likely pay less, as competition between
lawyers and non-lawyers will likely keep legal fees down. As we explained in our December 14
letter, fees paid by consumers in other Statesare substantially lower when there is competition
from lay closers? Furthermore, competition between lawyers and non-lawyers will likely
increase the choice of services available to North Carolinians: lay closers often settle loans when
consumers are off work or at their homes or other convenient locations, which may be
particularly important for rural consumers.3
As we said in the December letter, the issue of unauthorized practice of law is one of
protecting the public interest. Antitrust law and policy are important forms of consumer
protection. The two Opinions adopted by the Bar last fall, Opinions 2001-4 and 2001-8, barely
touched on the issue of consumer protection and provided no factual data to support banning all
lay closings. Moreover, if a closing is conducted by a lawyer representing the lender, that lawyer
has no obligation to advise the buyer about whether the deal is in his or her interest or to provide
independentadvice to the consumer. The assistanceof a lawyer at closing may be desirable in
some circumstances, but the choice of whether to hire a lawyer should be the consumer's,as the
North Carolina Special Committee on Real Estate Closings has recommended.4
Closing loans by mail or the Internet is a common practice for consumersbuying property
or refinancing loans in North Carolina's beach and mountain resort areas. For these consumers,
both the Authorized Practice of Law Opinion stating that lay closings are not prohibited and the
Ethics Opinion stating that lawyers need not be physically presentto close real estatetransactions
are important. Together, these Opinions would remove significant barriers to electronic
commerce in North Carolina. In addition, out-of-state lenders who may not have facilities in
North Carolina to close loans have used North Carolinian lay closing agents for refinancings.
The proposed Opinions together would enable them to continue doing SO.5
The Justice Department and FrC strongly urge the North Carolina State Bar to adopt both
Opinions. We do not believe North Carolina consumerswould be well served by adopting only
our December14 letterto apply not only to Opinions2001-4and 2001-8but alsoto the generalissueof
lay closings,which we understoodthe North CarolinaStateBar was consideringaddressingin an
omnibusopinion. SeeLetter from U.S. Departmentof Justiceand FederalTrade Commissionto Ethics
Committeeof the North CarolinaStateBar ("DOJ/FTC Letter") (Dec. 14,2001).
2See DOJ/FfC Letter (Dec. 14,2001).
3Id.
4Pora fuller discussionof theseissues,seeDOJ/FfC Letter (Dec. 14,2001).
5SeeDOJ/FfC Letter (Dec. 14,2001).
2

the Ethics Opinion that would allow attorneys to use their lay employees to close deals. It is our
judgment that actions short of allowing lay personsto compete with lawyers for the closing
businesswould be insufficient to protect consumers. For this reason, we have opposed attempts
in other Statesto declare real estate closings to be the practice of law while permitting attorneys
to have their lay employees conduct the closings.6
Free and unfettered competition is at the heart of the American economy. The United
States Supreme Court has observed, "ultimately, competition will produce not only lower prices
but also better goods and services. The heart of our national economic policy long has been faith
in the value of competition."'? The unauthorized practice of law opinions that have been adopted
by the North Carolina State Bar have erected a serious barrier against competition from lay
closing services. Because competition from lay closing services will likely benefit North
Carolinian consumersof real estateclosing services, we urge the Council to adopt both the
proposed Ethics Opinion and the Authorized Practice Opinion that permits non-lawyer
competition.
The Justice Department and FTC appreciatethis opportunity to present our views and
would be pleasedto address any additional questions or comments regarding competition
policies.
Chairman
Ted Cruz
Director
Office of Policy Planning
EverettJ. Bowman,Esquire	cc
6 SeeLetter from U.S. Departmentof Justiceto Board of Governors,KentuckyBar Association
(June10, 1999);Letter from U.S. Departmentof Justiceand FederalTrade Commissionto Supreme
Court of Virginia (January3, 1997).
7NationalSociety ofProfessionalEngineersv. United States,435 U.S. 679,695 (1978) (citing
StandardOil Co. v. FTC, 340 U.S. 231, 248 (1950».
3
JessicaN. Butler-Arkow
Attorney
United StatesDepartmentof Justice
Antitrust Division