Lawyers’ role in closings affirmed

SJC backs Mass. real estate bar in dispute with firm

By Jenifer B. McKim
Globe Staff / April 26, 2011

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The Massachusetts Supreme Judicial Court released a ruling yesterday that requires real estate lawyers to play a key role in residential home closings — a long-awaited decision that could mean stronger legal oversight for home buyers and more business for local lawyers.

The ruling by the state’s top court addresses a legal dispute in what has become a high-stakes turf battle between local real estate lawyers and a Pittsburgh company that provides services to mortgage lenders nationwide, including examining titles, disbursing settlement funds, and arranging for local lawyers to attend closings on the lenders’ behalf. At issue is what constitutes the practice of law in residential home closings.

Supporters of the ruling, which include local legal groups, say it is good for lawyers and for homeowners, who often are making one of the most important financial decisions of their lives. They say local real estate lawyers provide better oversight than those hired by a third party who show up just for real estate closings.

“The interests of private clients and the public alike are safeguarded when an attorney participates,’’ said Martin W. Healy, chief legal counsel of the Massachusetts Bar Association.

The dispute began in 2006 when the Real Estate Bar Association for Massachusetts filed suit against National Real Estate Information Services Inc., claiming some of the practices of the company constitute “the unauthorized practice of law.’’

Michael D. Ricciuti, an attorney for the company, yesterday declined to comment for this story.

In 2009, a US District Court judge found in favor of National Real Estate Information Services and ordered the local real estate bar to pay nearly $1 million in fees and costs. Last year, the US Court of Appeals for the First Circuit vacated the decision and sent clarifying questions to the Supreme Judicial Court for consideration.

Yesterday, the top court ruled unanimously that some of the services provided by National Real Estate Information Services are lawful, including title examinations and the preparation of mortgage-related forms.

Justice Margot Botsford, who wrote the decision, said the court couldn’t answer a second question related to whether the firm, by contracting local lawyers to attend real estate closings, is violating state law by not adequately representing its clients. The court record did not provide enough information to answer the question, she wrote.

She said nobody is questioning that an attorney should be at a real estate closing. However, a key question is whom the attorneys are representing, she wrote.

Botsford wrote that justices believe that real estate closings require the “substantive participation of an attorney on behalf of the mortgage lender.’’

She said attorneys would hardly be necessary if they only were required to show up at the end of a real estate deal to witness documents being signed.

“We consider a closing attorney’s professional and ethical responsibilities to require actions not only at the closing but before and after it as well,’’ she said. “We emphasize that the closing attorney possesses an ethical and professional obligation to ensure marketability of title regardless whether the closing attorney personally performs this analysis.’’

Ed Bloom, president of the Real Estate Bar Association for Massachusetts, said he was disappointed that the court didn’t go further in detailing what procedures are unlawful for outside companies like National Real Estate Information Services.

However, he was glad the top court discussed the importance of having an attorney oversee the entire real estate process.

He described closings carried out by National Real Estate Information Services as “witness closings’’ — where an attorney shows up to complete the process but doesn’t have any real knowledge about the transaction.

“They would hire an attorney, he would go to the closing, he wouldn’t represent anybody, and he knew nothing about the title,’’ Bloom said. “A lawyer being at the closing isn’t enough.’’

Richard Vetstein, a Framingham real estate lawyer, said the decision creates a barrier for out-of-state companies interested in coming into Massachusetts and taking over local closings at bargain-basement prices.

“The threat was we were going to be outsourced,’’ said Vetstein, who authors a local blog about real estate. “It reaffirms Massachusetts attorneys’ longstanding involvement in residential real estate transactions.’’

Jenifer B. McKim can be reached at