Can a Texas savings and loan or other lender charge a fee for filling in the blanks on real estate loan documents that its lawyers prepared?

Texas AG Opinion JM-943: Charging for Nonlawyer Document Preparation

Plain-English summary

In 1987 the Texas Legislature passed a law, article 320f, that says only a licensed Texas attorney can charge for preparing legal instruments that affect title to real property. Those instruments are the everyday papers of a real estate deal: deeds, deeds of trust, notes, mortgages, and lien releases. The point of the law is to stop people who are not lawyers from getting paid to do legal work, which is the unauthorized practice of law.

The Commissioner of the Texas Savings and Loan Department asked the Attorney General two practical questions about how the law applies to lenders.

The first question laid out a common situation. A savings and loan makes a loan. It is a party to the deal. Its own lawyers have already drafted and picked out the standard loan forms. A clerk at the association just fills in the blanks. The association charges interest, an origination fee, an application fee, and other normal loan charges, but it does not intend to charge, and says it does not charge, a separate fee for preparing the documents. Does that violate article 320f?

The Attorney General could not give a flat yes or no, because the answer depends on facts. Two facts matter. One is whether filling in the blanks on these forms is "preparing" a legal instrument at all. Merely writing down a borrower's answers on a standard form probably is not practicing law. But deciding whether the standard forms should be used in the first place probably is practicing law. That line has to be drawn case by case. The statute bans a charge for "all or any part" of the preparation, which the Attorney General read as a signal that the legislature wanted very little room for a nonlawyer to have a hand in the paperwork whenever a fee is being charged.

The other fact is whether a fee is actually being charged for the document work. The statute reaches any compensation, direct or indirect. So even if a lender says it is only charging interest and loan fees, if some of that money is really paying for a nonlawyer's document work, no matter what the charge is called, the statute applies. The Attorney General pointed to a Texas Supreme Court case taking a very broad view of what counts as a charge for preparing legal documents.

The second question was cleaner. Can the parties waive the ban by agreement, in writing or orally? No. The statute has no waiver provision, and letting parties waive it would defeat its purpose. The law protects two things: the public's interest in clean, error-free real estate titles, and consumers, usually the buyer or borrower, who typically have less bargaining power than the seller or lender. A protection like that cannot be signed away, because the stronger party would just demand a waiver every time and the law would mean nothing.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Article 320f, V.T.C.S., and the surrounding law on the unauthorized practice of law have seen legislative and judicial developments since 1988, and the statutes cited here (including the State Bar Act and the Real Estate License Act references) have been recodified and amended. Anyone weighing whether a document-preparation charge is lawful today should check the current statutes and current case law rather than rely on this 1988 reading.

Who this opinion affected (as of 1988)

Savings and loan associations and other lenders: The opinion warned that even where a lender is a party to the deal and only fills in blanks on attorney-drafted forms, a charge that indirectly compensates nonlawyer document work can violate article 320f. It did not bless the arrangement described in the request, because the answer depended on facts the opinion could not resolve.

Home buyers and borrowers: The opinion read the statute as consumer-protective, aimed at the party with less bargaining power, and confirmed that the protection cannot be waived in the loan paperwork.

Attorneys and the courts: The opinion tied article 320f to the existing law on the unauthorized practice of law and left the practicing-law and fee questions to be decided on the facts of each case.

Common questions

Does a lender break the law by charging for filling in blanks on loan forms?
It depends on the facts. The Attorney General concluded that whether completing standard forms is "practicing law" and whether a fee is actually charged for that work are both fact questions. Merely recording a borrower's answers on a form probably is not practicing law, but deciding whether to use the forms probably is.

What if the lender only charges interest and loan fees, not a document fee?
The statute reaches compensation that is direct or indirect. If any part of the interest or fees really pays for nonlawyer document preparation, no matter how it is labeled, article 320f can still apply. The opinion cautioned lenders on exactly this point.

Can the borrower and lender just agree to waive the rule?
No. The Attorney General concluded article 320f cannot be waived. The statute has no waiver provision, and it protects both the public interest in clear title and the party with weaker bargaining power, so private parties cannot waive it.

Who does article 320f apply to, only strangers to the deal?
No. By its terms the statute covers any person, including a party to the transaction. The legislative history showed it was meant to reach lenders.

Background and statutory framework

The 70th Legislature enacted S.B. 1075, codified as article 320f, V.T.C.S., effective September 1, 1987. Section 2(a) provides that a person, other than an attorney licensed in this state, may not charge or receive, directly or indirectly, any compensation for all or any part of the preparation of a legal instrument affecting title to real property, including a deed, deed of trust, note, mortgage, and transfer or release of lien. Section 2(b) allows a person to seek reimbursement for the cost of retaining a licensed attorney to prepare an instrument, and section 2(c) preserves an attorney's ability to pay secretarial and paralegal expenses and allows completion of lease or rental forms approved by an attorney; it also exempts a licensed real estate broker or salesman acting under the Real Estate License Act (Article 6573a, Vernon's Texas Civil Statutes). Section 2(d) states the remedies are cumulative and do not limit the definition of the practice of law in the State Bar Act (Article 320a-1, Vernon's Texas Civil Statutes). Section 3 lets a person who pays a prohibited fee recover the fee, treble damages, and court costs and attorney's fees; section 4 provides that a violation constitutes the unauthorized practice of law and may be enjoined.

The purpose of article 320f is to prevent the unauthorized practice of law that occurs when a nonlawyer prepares legal instruments affecting title to real property (Carroll v. Bullock, 530 S.W.2d 135 (Tex. Civ. App. - Austin 1975, no writ)). Whether a person is a party to the transaction is irrelevant, because the statute covers any person, and the legislative history plainly shows it was meant to apply to lenders. Because the prohibition is a way to curb the unauthorized practice of law, what counts as "preparation of legal instruments" is decided with reference to the practice of law. Whether the clerical completion of standard forms prepared by attorneys for routine transactions is practicing law is a factual and often close question: recording a borrower's responses on a standard form probably does not require legal skill, while determining whether the forms should be used at all probably does (Unauthorized Practice Committee v. Cortez, 692 S.W.2d 47 (Tex. 1985), cert. denied, 106 S. Ct. 384 (1985)). The "all or any part" formulation calls for a liberal interpretation, so when a fee is charged the legislature intended little room for a nonlawyer to complete title papers.

Whether a fee is charged is also a fact question. Because the statute bars any compensation, direct or indirect, it envisages a liberal reading of what constitutes compensation; if compensation for a nonlawyer's document work is recouped in a charge, no matter how labeled, article 320f applies. The Texas Supreme Court has taken an extremely liberal view of what constitutes a charge for the preparation of legal documents in the title-company context (Hexter Title & Abstract Co. v. Grievance Committee, 179 S.W.2d 946 (Tex. 1944)).

On the second question, article 320f cannot be waived by the parties. The statute contains no waiver provision, and waiver would be inimical to its purpose of preventing the unauthorized practice of law and protecting the public interest in clear real estate titles. The legislature was also concerned with protecting consumers, ordinarily the party with less bargaining power, from fees for legal work done by nonlawyers; a statute designed to protect a party with less bargaining power cannot be waived, because the stronger party would otherwise simply require a waiver and defeat the statute's purpose.

Citations

Statutory authority:

• Article 320f, V.T.C.S. (S.B. 1075, 70th Leg.; bar on nonlawyer charges for preparing instruments affecting title to real property)
• Article 6573a, Vernon's Texas Civil Statutes (Real Estate License Act; broker and salesman exemption)
• Article 320a-1, Vernon's Texas Civil Statutes (State Bar Act; definition of the practice of law)

Cases:

• Carroll v. Bullock, 530 S.W.2d 135 (Tex. Civ. App. - Austin 1975, no writ) (Texas appellate court; purpose of curbing unauthorized practice of law)
• Unauthorized Practice Committee v. Cortez, 692 S.W.2d 47 (Tex. 1985) (Texas Supreme Court; what constitutes practicing law)
• Hexter Title & Abstract Co. v. Grievance Committee, 179 S.W.2d 946 (Tex. 1944) (Texas Supreme Court; liberal view of a charge for preparing legal documents)

Prior Attorney General materials referenced: none.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-943
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0943.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

August 22, 1988

Honorable H. Earl Hall, Jr.
Commissioner
Texas Savings and Loan Department
2601 North Lamar, Suite 201
Austin, Texas 78705

Opinion No. JM-943

Re: Construction of V.T.C.S. art. 320f (RQ-1434)

Dear Mr. Hall:

The 70th Legislature enacted S.B. 1075, codified as article 320f, V.T.C.S., and effective on September 1, 1987. You ask two questions about this new statute:

1. Will a Texas Savings and Loan Association (hereinafter Association) be construed to be charging either directly or indirectly, a fee in violation of Art. 320f when in connection with any loan the association makes when it:

(i) is an interested and/or signatory party to the instruments evidencing the transaction;

(ii) performs only the clerical task of 'filling in the blanks' on the appropriate loan documents, such documents having been previously prepared and selected by its attorneys for use in such situations;

(iii) charges interest on the loan, loan origination fees, application fees and other incidental fees normally associated with extending a loan; and

(iv) specifically does not intend to and does not charge a fee for the preparation of the documents.

2. May the prohibition against charging fees as provided in Art. 320f be fully or partially waived by written and/or oral agreement of the parties, lender and customer?

The statute provides as follows:

Definition

Sec. 1. In this Act, 'person' has the meaning given that term by Subdivision (2), Section 311.005, Code Construction Act (Chapter 311, Government Code).

Prohibited Acts

Sec. 2. (a) A person, other than an attorney licensed in this state, may not charge or receive, either directly or indirectly, any compensation for all or any part of the preparation of a legal instrument affecting title to real property, including a deed, deed of trust, note, mortgage, and transfer or release of lien.

(b) This section does not prevent a person from seeking reimbursement for costs incurred by the person to retain a licensed attorney to prepare an instrument.

(c) Nothing in this Act shall be construed to prevent an attorney from paying secretarial, paralegal, or other ordinary and reasonable expenses necessarily and actually incurred by the attorney for the preparation of legal instruments nor does it prevent a person from completing lease or rental forms which have been prepared by an attorney licensed in this state and approved by such attorney for the particular kind of transaction involved, or which have been prepared by the property owner or prepared by an attorney and required by the property owner. The provisions of this Act do not apply to a licensed real estate broker or salesman performing the acts of a real estate broker pursuant to the provisions of The Real Estate License Act (Article 6573a, Vernon's Texas Civil Statutes).

(d) Cumulative Remedies. The provisions of this Act are not exclusive and in no way limit or restrict the definition of the practice of law contained in the State Bar Act (Article 320a-1, Vernon's Texas Civil Statutes), nor do the provisions of this Act limit or restrict any remedy provided in the State Bar Act or any other law designed to eliminate the unauthorized practice of law by lay persons and lay agencies.

Recovery

Sec. 3. A person who pays a fee prohibited by this Act may bring suit for and is entitled to:

(1) recovery of the fee paid;

(2) damages equal to three times the fee paid; and

(3) court costs and reasonable and necessary attorney's fees.

Unauthorized Practice of Law

Sec. 4. A violation of this Act constitutes the unauthorized practice of law and may be enjoined by a court of competent jurisdiction.

Transition

Sec. 5. This Act applies only to fees charged or received on or after the effective date of this Act.

Your first question is whether a lender violates article 320f if it 1) is a party to the transaction; 2) only "fills in the blanks" on legal instruments prepared by an attorney; 3) charges interest and fees for the loan; but 4) does not charge a fee for preparing legal instruments affecting title to real property.

The purpose of article 320f is to prevent the unauthorized practice of law that occurs when a person other than an attorney prepares legal instruments affecting title to real property. See Carroll v. Bullock, 530 S.W.2d 135, 136 (Tex. Civ. App. - Austin 1975, no writ); V.T.C.S. art. 320f, sec. 2(d) and sec. 4; Bill Analysis, Tex. S.B. 1075, 70th Leg. (1987). Whether such a person is a party to the real estate transaction to which the legal instruments relate is irrelevant to applying the statute, which by its terms covers any person, including parties to the transaction. For example, the legislative history quite plainly shows that the statute was meant to apply to lenders. See Bill Analysis, Tex. S.B. 1075, 70th Leg. (1987).

Since prohibiting a charge for the preparation of a legal instrument by a person other than an attorney is merely a way to curb the unauthorized practice of law, what is meant in article 320f by the "preparation of legal instruments" must be decided with reference to the practice of law. Whether the completion by clerks of standard forms prepared by attorneys for routine transactions is "practicing law" will always be a factual and often a close question. See 7 Tex. Jur.3d Attorneys at Law sec. 10. Although we cannot decide fact questions, we can make some general observations. While the mere act of recording a borrower's responses to the questions on a standard form probably does not require legal skill or knowledge and would therefore not be practicing law, the act of determining whether the forms should be employed at all probably does require legal skill or knowledge and would therefore be practicing law. See Unauthorized Practice Committee v. Cortez, 692 S.W.2d 47, 50 (Tex. 1985), cert. denied, 106 S. Ct. 384 (1985).

By prohibiting a charge by a person other than an attorney for "all or any part of the preparation of a legal instrument," article 320f envisages a liberal interpretation of what constitutes practicing law. Based on the all-or-any-part formulation, we conclude that at least when a fee is charged, the legislature intended there be little room for a person other than a lawyer to have any role in completing the papers necessary to affect title to real property.

Assuming that a fee is charged, just what a person other than an attorney can do before violating article 320f will depend on exact factual circumstances. For example, we assume no one would argue that a secretary who types a document and charges for his effort has prepared "all or any part" of a legal instrument and thus violated article 320f. Similarly, if a lawyer 1) determines that certain transactions can be conducted by "filling in the blanks" on standard forms; 2) prepares the standard forms; and 3) reviews a particular transaction to ensure that the standard forms are appropriate, then it may not violate article 320f for a lender to have a clerk "fill in the blanks" and for the lender to charge for this clerical service. Indeed, section 2(c) of article 320f contemplates something similar with regard to the lease or rental of real property. As we have already noted, however, we cannot resolve the fact questions raised by this hypothetical.

Of course, article 320f only applies if a fee is charged. Whether a fee is charged is another fact question. By way of general observation, we note that by prohibiting any compensation, direct or indirect, article 320f envisages a liberal interpretation of what constitutes compensation. In your question you posit that no fee is charged for the preparation of legal instruments, but that interest and other fees are charged. We can only caution that for the preparation of legal instruments if compensation for the work of persons other than an attorney is recouped in a charge, no matter what it is labeled, then article 320f applies. In the context of a title company, the Supreme Court has taken an extremely liberal view of what constitutes a charge for the preparation of legal documents. See Hexter Title & Abstract Co. v. Grievance Committee, 179 S.W.2d 946, 952 (Tex. 1944).

As for your second question, the answer is that parties to an agreement that requires preparation of a legal instrument affecting title to real property cannot waive article 320f. The statute does not provide for waiver. Moreover, waiver is inimical to the statute's purpose -- preventing the unauthorized practice of law. In enacting the statute, the legislature was concerned about protecting the public interest in clear real estate titles. The statute is designed to deter nonlawyers from drafting legal instruments and perhaps clouding title by a legal error. See Hearings on Tex. S.B. 1075 before the Senate Jurisprudence Comm., 70th Leg. (April 21, 1987) (tape 3) (available from Senate Staff Services). When a statute is designed to protect the public interest, it cannot be waived by private parties. When enacting this statute, the legislature was also concerned about protecting consumers from fees for legal work done by nonlawyers. Id. Presumably sellers or lenders in real estate transactions often have greater bargaining power than buyers or borrowers. This statute, therefore, prevents the stronger party (the seller or lender) from extracting fees from the weaker party (the buyer or borrower). When a statute is designed to protect a party with less bargaining power, it cannot be waived. If it could, then the stronger party would merely require waiver of the weaker party, thereby thwarting the purpose of the statute. See N. Singer, 2A Sutherland Statutory Construction sec. 55.08 (4th ed. 1984); 60 Tex. Jur.2d Waiver sec. 10.

SUMMARY

What constitutes the preparation of legal instruments within the meaning of article 320f is a fact question. What constitutes the charging of a fee within the meaning of article 320f is a fact question. Parties to a transaction cannot waive article 320f.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by F. Scott McCown
Assistant Attorney General