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A Georgia real estate attorneys’ group had no success in court pursuing its claim that a title services company was practicing law without a license. But the issue of whether laypersons or attorneys who function as nothing more than notaries, can conduct closings is becoming a hot topic of discussion in Georgia. Reports are increasing in the state of “witness-only” closings, in which a layperson — or a lawyer acting only as a notary — conducts the closing by presenting a package of documents, prepared by others, to the borrower and getting them signed. To clarify the issue, the State Bar of Georgia will hold a public meeting in March to address the issue of who can prepare and execute deeds. Last fall, the Georgia Real Estate Closing Attorneys Association filed suit in Fulton Superior Court against Omni Title Services Inc. GRECAA claimed that nonlawyer employees or officers at Omni had been presiding over closings and preparing legal documents to convey real estate. GRECAA’s attorney in the litigation, Harry S. Kuniansky, told the Daily Report previously that Omni had been listed as the settlement agent in a number of transactions and received a fee as such. He said the suit was aimed at protecting the public and keeping real estate lawyers from losing business. Omni denied the claim, insisting that GRECAA had its facts wrong. Its lawyer, Nisbet S. Kendrick III, said in an earlier interview that Omni was not using laypersons to perform legal services, adding that Omni was a lawyer-owned title shop. Kendrick challenged GRECAA’s standing to sue, and hinted that the group’s aims were about protectionism. The facts of the dispute were never reached in court because Fulton Superior Court Judge Doris L. Downs ruled that GRECAA had no standing to bring the case and dismissed it. Downs cited prior case law that says only the Supreme Court of Georgia, through the State Bar of Georgia, can regulate the practice of law. GRECAA v. Omni Title Services, No. 2002CV54444 (Fult. Super. June 13, 2002). Kendrick said his client was pleased with the ruling. “The good thing about this, from a policy standpoint, is that it makes the supreme court and the bar … the filter for considering who’s practicing in accordance with the rules, as opposed to competitors who have an agenda.” GRECAA hasn’t decided whether it will appeal, said the group’s president Lee A. Cohen of Terrell & Cohen. ‘A VERY HOT ISSUE’ Irrespective of the outcome of that case, nonlawyer involvement in real estate closings is shaping up as “a very hot issue right now,” according to Cohen. GRECAA’s suit may be just the opening salvo of a bigger battle that could shape the nature of real estate transactions in Georgia, a turf war that would pit real estate lawyers against nonlawyers who want a share of that lucrative business. Advocates of witness-only closings contend that they save consumers money in what is often a routine process, while lawyers insist that the fact they are licensed and insured experts makes their services a valuable bargain. The director of the State Bar’s unauthorized practice of law section, Steven J. Kaczkowski, said reports of witness-only closings are becoming “somewhat frequent” in Georgia. TWO KEY FACTORS At least two factors have brought this issue to the forefront: the growth of e-commerce, which allows loans to be closed via the Internet, and the increasing number of out-of-state and Internet mortgage lenders who contract with in-state parties to close loans. In other states, those who advocate opening real estate closings to nonlawyers have had a powerful ally: the Federal Trade Commission and the U.S. Justice Department. Those agencies have lobbied bar organizations recently in several other states, including Kentucky, Virginia, Rhode Island and North Carolina, to end policies that restrict the participation of nonlawyers in real estate transactions. Recently, W. Ryan Frier, a Milledgeville attorney, upset about witness-only closings, asked the State Bar to weigh in on the matter with an advisory opinion. The bar’s standing committee on the unlicensed practice of law has scheduled a March 21 public hearing to wrestle with this question: Is a nonlawyer who prepares or facilitates the execution of deeds of conveyance practicing law without a license? Frier, of Frier & Oulsnam, thinks it is. If witness-only closings are OK, Frier said, he may as well run a business as opposed to a law firm bound by bar rules and requirements. Frier said he and his partner plan to be at the public hearing. Kaczkowski said he expects “quite a turnout” for the hearing. Any advisory opinion drafted by the bar, he said, will go to the Georgia Supreme Court for final approval. Jeffrey P. Ganek, a former GRECAA president and partner with Ganek, Wright & Dobkin, said the hot issue in Georgia is the witness-only closings, which sometimes involve lawyers. Ganek said his firm did several of those closings a few years ago and decided not to do any more. Lawyers who handle those closings are given a packet of documents prepared elsewhere and asked to get them signed. “I do not believe it’s proper,” Ganek said, adding that he couldn’t even answer borrower’s questions because he didn’t prepare the documents and was only serving as a notary, in effect, to get them signed. The propriety of those types of closings, he said, is the issue the State Bar hopes to clarify. “The broader issue is having nonlawyers do closings.” FEDS ENTER CONTROVERSY The federal government has gotten involved in that issue in several other states, most recently in North Carolina, where it urged the state bar to adopt two proposed opinions that would open up the process. The change, wrote FTC and Justice officials in a July 11, 2002 letter to the North Carolina bar, “will allow North Carolina consumers to enjoy the fruits of competition between attorneys and nonlawyers: lower prices and more choices in how and when closing services are provided.” The letter argued that fees paid by consumers are lower in states that permit competition from “lay closers,” and that nonlawyer closers often handle transactions at the borrower’s home or other convenient locations. The letter also pointed out that attorneys represent the lender and have no obligation to offer independent advice to the buyer. “The assistance of a lawyer at closing may be desirable in some circumstances, but the choice of whether to hire a lawyer should be the consumer’s,” federal officials wrote. “[A]ctions short of allowing lay persons to compete with lawyers for the closing business would be insufficient to protect consumers.” Federal officials also have urged the American Bar Association, which is taking a look at its Model Definition of the Practice of Law, to open up the process, particularly when it comes to real estate closings. The Title Appraisal Vendor Management Association, a trade organization that promotes the interests of title insurers, appraisal services and other settlement service companies, agrees with the FTC’s stance. In a statement on TAVMA’s Web site, the group says that “Title providers are fully qualified industry experts who perform settlement services on a daily basis and the use of an attorney does not guarantee the consumer is any better served.” Kaczkowski said other states don’t require the level of attorney involvement in the real estate process that Georgia does. Georgia, in O.C.G.A. � 15-19-50, defines the practice of law to include such actions as “conveyancing,” “the preparation of legal instruments of all kinds whereby a legal right is secured,” and “the rendering of opinions as to the validity or invalidity of titles to real or personal property.” STATE BAR, HIGH COURT ENTER ISSUE Georgia’s State Bar and supreme court also have addressed the issue. Formal Advisory Opinion 86-5, approved by the supreme court in 1989, says the closing of real estate transactions constitutes the practice of law. “Accordingly, it would be ethically improper for lawyers to permit nonlawyers to close real estate transactions,” the opinion says, although it adds that certain tasks can be delegated to nonlawyers who are supervised by lawyers. A more recent advisory opinion, 00-3, approved by the supreme court in 2000, says that lawyers must supervise the closing in person, and not by telephone. Eldon L. Basham, chair of the executive committee of the State Bar’s real property section, said under Georgia’s traditional opinions, conveyancing — the transfer of property — has been regarded as the practice of law. But other states, particularly western states, have title companies involved in conveyances without lawyers. Those companies, Basham said, are licensed to do so and are closely regulated by the states. In Georgia, he added, real estate agents, lenders and others would like to be able to conduct lawyerless real estate transactions. ‘NOT NECESSARILY CHEAPER’ But, he said, “From what we can tell it is not necessarily cheaper and it’s not necessarily better” to have nonlawyers handling what can be the most important transaction a consumer will ever make: the purchase of property. Lawyers, he said, are governed by ethical standards, regulated by the state bar and trained in the nuances of property laws. Those who believe they have been wronged by an attorney have recourse, he continued, from malpractice insurance and from the bar’s client security fund. Moreover, the State Bar imposes strict controls on attorneys’ escrow accounts. While closing attorneys represent the lender, not the borrower, those lawyers will ensure that the borrower gets good title, both to avoid a suit and, Basham said, because they have an ethical obligation to deal fairly with all parties to the transaction. “There are no such standards for lay people,” he said. Although Georgia closing attorneys are concerned about attempts to change the current practice, Basham said, “I don’t see any reason the supreme court would change its opinion” on the matter. Ganek said closings by their very nature are legal transactions. “The documents are legal documents.” By having a lawyer handle it, he said, the public gets “the bargain of the century.” The attorney reviews the title, the survey, the loan documents and is there at closing for an hour, approximately, to answer questions about the legal implications of documents — all for $450 in Georgia, he said. In 25 years of practice, he’s never done a closing where the borrower didn’t have questions, Ganek said. Frier said the argument that including nonlawyers will promote competition and therefore lower costs, is misleading. All that change would do, he said, is shift who gets the funds. Conveying title to property is “either the practice of law or it’s not,” said Frier. “I don’t want to have to change my area of practice,” he added. “But the bottom line is, you do have to make a living.”

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