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Real estate lawyers in Chicago filed suit Monday alleging a leading Chicago area real estate brokerage company is engaging in the unauthorized practice of law by encouraging clients to use in-house and contract attorneys instead of independent counsel to close home deals. In filing the suit in Illinois’ Cook County circuit court, the 800-member Illinois Real Estate Lawyers Association says it is hoping for an injunction, barring Wilmette, Ill.-based Koenig & Strey from the alleged misconduct. IRELA also is seeking a court fine and a retraction for a Feb. 9 e-mail that first raised the organization’s ire. Entitled “Closing myth number 1,” the offending Koenig memorandum advises clients that “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.” Besides representing the unauthorized practice of law, “We think this is a fundamental conflict of interest,” IRELA President John G. O’Brien, of Arlington Heights, said during a news conference in the Chicago office of the Illinois State Bar Association. The concern is that an attorney beholden to Koenig & Strey wouldn’t necessarily look out for the best interest of the buyer or seller. “They are selling, we are representing,” explained O’Brien, who founded IRELA in 1997. Koenig & Strey President Christopher J. Eigel could not immediately be reached for comment. However, he told American Lawyer Media in May that his company “is not going to engage in the unauthorized practice of law in spite of what the e-mail looks like.” Eigel also said at the time that “Closing myth number 1″ didn’t reflect company policy and shouldn’t have been sent out. The Illinois Attorney General’s Consumer Protection Division confirmed back then that it was reviewing the matter. When asked about the status of the review, a spokeswoman said Monday that Koenig & Strey promised in writing that it would not violate the Illinois Supreme Court’s 1966 decision in The Chicago Bar Association v. Quinlan and Tyson Inc., 34 Ill. 2d. 116, which held that it’s OK for a real estate brokerage firm in some instances to fill out blanks in a form, but not prepare documents, as is the purview of lawyers. The letter, signed by Eigel, notes that “Koenig & Strey recognizes the right of every party of a real estate transaction to be represented by an attorney of his or her choice or not to be represented by an attorney and further recognizes that it may not designate one of its staff attorneys (or a staff attorney of one of its affiliates) to represent a seller or buyer in a real estate transaction.” IRELA, which previously sent a cease-and-desist order in April, decided to file its civil suit after attempts to resolve the matter via meetings and other correspondence failed, according to O’Brien. O’Brien said clients typically spend between $300 and $500 in Illinois to retain an attorney to help close the sale of a $150,000 home. And while Koenig & Strey is alleged to be offering these services for free, O’Brien characterized it as “false savings.” Informal studies conducted by IRELA show that consumers pay more for closings in states where such practices are sanctioned, O’Brien said. Still, ISBA third vice president and Chicago attorney Terry Lavin acknowledged most consumers would jump at the chance to get all their buying, selling and closing deals done at the same shop without having to take the extra step of looking for an independent attorney. “Consumers are lured into the belief that they are represented when they really aren’t,” he said. As an example, Lavin pondered, “What happens if the deal goes wrong?” The buyer or seller would then have to go out and hire a lawyer to straighten it out. “All the litigation after the fact is not worth the savings of a few hundred dollars,” he said. The ISBA, while not a party to the suit, is supportive of the litigation. Lavin, who also is chair of the ISBA’s Task Force on Multidisciplinary Practice, said the ISBA will likely file an amicus curiae brief and make the court aware of past ISBA Ethics Opinions that are on point. In addition to preparing deeds and bills of sale, IRELA’s suit alleges Koenig & Strey and its entities give legal advice; furnish opinions as to the condition of title to real estate; maintain a legal department for the benefit of persons not connected with its business; render legal services; solicit legal employment; and assist in-house attorneys to participate in the unauthorized practice of law. Also among the allegations is that Koenig & Strey should be enjoined because the company implies that “in-house lawyers are available at a substantial savings � without disclosing the precise and limited nature of services that may be provided, the scope of the conflict of interest, the money that will be charged and the profits that will be collected” by the company. Though he declined to name them, O’Brien said IRELA has identified two licensed attorneys involved in the process, one in-house and one contract. IRELA plans to file complaints against the two with the Attorney Registration and Disciplinary Commission, the state Supreme Court agency charged with policing the legal profession.

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