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Real estate lawyers are threatening to sue a leading Chicago real estate brokerage firm if it doesn’t rescind an internal memorandum that bluntly tells its sales force consumers don’t always need an independent lawyer to close their home deals. Representatives from Wilmette-based Koenig & Strey quietly sat down last week with Illinois Real Estate Lawyers Association leaders to discuss the potential conflict of interest and to possibly avoid involving the courts. But the meeting, according to a lawyer for IRELA, was “something less than productive.” “The rhetoric was such that they wanted to work something out, but nothing substantive occurred,” said Johnson & Bell partner Joe Marconi, who sent a cease-and-desist letter to Koenig & Strey in April. IRELA considers 600-agent Koenig & Strey’s memo, which details a strategy to handle real estate closings in-house, to be tantamount to advocating the unauthorized practice of law. At issue is an internal Koenig & Strey e-mail dated Feb. 9 and sent to the brokerage’s agents throughout Chicago and the suburbs. Entitled “Closing myth number 1,” the memo advises brokers to refer clients to in-house lawyers to close deals with a one-stop-shopping multidisciplinary practice approach many lawyers had thought would come first from one of the Big Five accounting firms. “More and more we are asked the question by sellers, �Do we need an attorney to represent us at our closing?’ The answer that we provide is NO,” the memo states. Rather, the Koenig & Strey memo suggests “The preparation of closing documents such as a deed, bill of sale, affidavit of title and transfer declarations can be prepared by one of our staff attorneys.” That approach, while it may appear convenient, is an obvious conflict of interest, said IRELA President John G. O’Brien. “We think to suggest that a corporate lawyer can prepare documents and foist them on the unsuspecting seller … is the unauthorized practice of law,” said O’Brien, a real estate attorney in Arlington Heights. O’Brien and the 700-member IRELA found out Friday they aren’t alone in their thinking. At their monthly meeting, the Illinois State Bar Association Board of Governors voted to support legal action, in the form of an amicus brief or as a possible party to a suit, to stop Koenig & Strey or other brokerages from establishing a similar policy. “It’s not only a turf battle, it’s a question of providing competent counsel,” said Tim Eaton, ISBA second-vice president. However, Koenig & Strey President Christopher J. Eigel is confident there won’t be any sort of battle, in or out of the courts. “We are not going to engage in the unauthorized practice of law in spite of what the e-mail looks like,” he said, adding that the e-mail shouldn’t have been sent and isn’t reflective of the company’s policy. “Our perspective is that this is a non-issue,” Eigel said. “We will resolve any differences there are.” But O’Brien insists that the only way for Eigel and Koenig & Strey to resolve the issue is to submit an “unequivocal retraction” promising they will not use in-house lawyers to circumvent the role of independent lawyers in closings. “Unless they will recant categorically and unequivocally, we feel we have no choice [but to pursue a remedy in the court],” O’Brien said. “If non-lawyers are going to be giving advice to people on these issues, we cannot condone it.” IRELA members also aren’t convinced the memo and its theme is isolated to Koenig & Strey. Marconi said IRELA’s investigation already has turned up evidence that similar practices are being employed by other brokerages. Patricia Kelly, chief of Attorney General Jim Ryan’s Consumer Protection Division, was unsure whether any other brokerages are being investigated. But Kelly did say her division has been looking into the Koenig & Strey matter. “We’re still reviewing the conduct of Koenig & Strey,” she said, adding however, that her office is satisfied the brokerage is no longer distributing the memo. Concern about conflict of interest is centered around the moment of closing, which for the broker is the point of commission. An independent attorney can say to a buyer at any time: “Don’t close, the deal isn’t good.” But will an in-house brokerage lawyer have the buyer’s best interests in mind? Or will the in-house attorney feel more beholden to the brokerage that cuts his or her paycheck? Lawyers from IRELA and the ISBA say it’s a classic conflict of interest scenario, and one that is prohibited by both the Illinois Rules of Professional Conduct and unauthorized practice of law statutes. Lawyers also aren’t allowed to share fees or partner with non-lawyers.

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