Can a Georgia lawyer conduct a 'witness only' real estate closing, use lender-prepared documents, and route closing funds outside the trust account?

Plain-English summary

The opinion answers three questions about a lawyer's role in a Georgia real estate closing. First, it concludes that a lawyer may not ethically conduct a "witness only" closing, in which the lawyer presides over the execution of documents but purports to act merely as a witness and notary rather than as an attorney. Because Georgia law (subject to the pro se exemption) requires a lawyer to handle a real estate closing, the lawyer who signs the closing statement or accepts the documents is doing so as a lawyer, and characterizing the role as that of a mere witness is a misrepresentation that violates Rule 8.4(a)(4). The opinion describes the lender practice that prompted the question: out-of-state lenders sending "signing instructions" and document packets that direct the attorney not to review the documents or advise the parties, which can facilitate foreclosure fraud and title defects.

Second, the opinion concludes that a lawyer may use documents prepared by a lender or others, but only after reviewing them for accuracy, resolving errors, detecting and resolving title ambiguities or defects, and otherwise acting with competence under Rules 1.1 and 2.1. The duty to review, revise, approve, and adopt applies to the entire series of events that make up a closing, and the lawyer maintains full professional and direct responsibility for the whole transaction even when some steps are performed elsewhere.

Third, the opinion concludes that a lawyer who receives funds in a closing must deposit them into and disburse them from a lawyer's trust account under Rule 1.15(II). The lawyer violates the rules by delivering closing proceeds to a title company or third-party settlement company for disbursement instead of using an attorney escrow account, though Georgia law also allows the lender to disburse funds.

In practice

Under the Georgia rules as they stood at the time of this opinion, the opinion holds that conduct framed as a "witness only" closing is impermissible: a lawyer presiding over a Georgia closing is acting as a lawyer, and disclaiming that role is a misrepresentation under Rule 8.4(a)(4). The opinion requires the lawyer to be in control of the closing from beginning to end and to review, revise, and adopt the documents used.

The opinion holds that using lender- or third-party-prepared documents is permitted only after the lawyer verifies their accuracy and adopts the work, consistent with the competence duties in Rules 1.1 and 2.1 and the supervision duties in Rules 5.3 and 5.5. It also holds that closing funds the lawyer receives must move through the lawyer's trust account under Rule 1.15(II), not a title or settlement company.

Common questions

Q: Can a lawyer in Georgia do a "witness only" closing for an out-of-state lender?

A: No. The opinion concludes that a lawyer who presides over a Georgia closing is acting as a lawyer, so labeling the role "witness only" misrepresents the lawyer's role in violation of Rule 8.4(a)(4); the lawyer must control the closing from beginning to end.

Q: Can a closing lawyer rely on documents the lender prepared?

A: Yes, but only after review. The opinion holds the lawyer may use documents prepared by others after ensuring their accuracy, making necessary revisions, resolving title problems, and adopting the work, consistent with the competence duty in Rules 1.1 and 2.1.

Q: Where must closing funds go?

A: The opinion holds that funds the lawyer receives in connection with a closing must be deposited into and disbursed from the lawyer's (or another lawyer's) trust account under Rule 1.15(II); routing them to a title or settlement company for disbursement violates the rules.

Background and rules framework

The opinion interprets Georgia Rules of Professional Conduct 1.1 (competence) and 2.1 (independent professional judgment), 8.4(a)(4) (misconduct involving misrepresentation), 1.15(II) (trust accounts), and 5.3 and 5.5 (supervision of nonlawyers and unauthorized practice), corresponding to ABA Model Rules 1.1, 2.1, 8.4, 1.15, 5.3, and 5.5. It relies on the requirement (from UPL Advisory Opinion 2003-2, the Supreme Court order adopting it, and O.C.G.A. § 15-19-50) that, subject to the pro se exemption, only a lawyer may close a real estate transaction in Georgia, and builds on Formal Advisory Opinions 86-5, 00-3, and 04-1 and ABA Formal Opinion 08-451 on outsourcing.

Citations and references

Rules of Professional Conduct:

• Georgia RPC 1.1 and 2.1 (ABA Model Rules 1.1, 2.1): competence and independent judgment
• Georgia RPC 8.4(a)(4) (ABA Model Rule 8.4): misconduct involving misrepresentation
• Georgia RPC 1.15(II) (ABA Model Rule 1.15): safekeeping property and trust accounts
• Georgia RPC 5.3 and 5.5 (ABA Model Rules 5.3, 5.5): nonlawyer assistance and unauthorized practice

Statutes:

• O.C.G.A. § 15-19-50 (practice of law); § 15-19-53 and § 15-19-54 (title examination and paralegal services); § 44-14-13(a)(10) (lender disbursement)

Other opinions cited:

• UPL Advisory Opinion 2003-2 (witness-only closings constitute unauthorized practice)
• Formal Advisory Opinions 86-5, 00-3, and 04-1
• ABA Formal Op. 08-451 (outsourcing legal and nonlegal work)

See also

• State Bar of Georgia Ethics Op. 23-1: Real Estate Closings by Video Conference
• ABA Formal Op. 08-451: Outsourcing Legal and Nonlegal Services
• ABA Formal Op. 506: Responsibilities Regarding Nonlawyer Assistants

Source

• Landing page: https://www.gabar.org/handbook?rule=rule572

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FORMAL ADVISORY OPINION NO. 13-1
Approved And Issued On September 22, 2014
Pursuant To Bar Rule 4-403
By Order of The Supreme Court Of Georgia
Supreme Court Docket No. S14U0705

QUESTIONS PRESENTED :

1. Does a Lawyer [1] violate the Georgia Rules of Professional Conduct when he/she conducts a “witness only” real estate closing?

2. Can a Lawyer who is closing a real estate transaction meet his/her obligations under the Georgia Rules of Professional Conduct by reviewing, revising as necessary, and adopting documents sent from a lender or from other sources?

3. Must all funds received by a Lawyer in a real estate closing be deposited into and disbursed from the Lawyer’s trust account?

SUMMARY ANSWER :

1. A Lawyer may not ethically conduct a “witness only” closing. Unless parties to a transaction are handling it pursuant to Georgia’s pro se exemption, Georgia law requires that a Lawyer handle a real estate closing (see O.C.G.A § 15-19-50, UPL Advisory Opinion No. 2003-2 and Formal Advisory Opinion No. 86-5) [2] . When handling a real estate closing in Georgia a Lawyer does not absolve himself/herself from violations of the Georgia Rules of Professional Conduct by claiming that he/she has acted only as a witness and not as an attorney. (See UPL Advisory Opinion No. 2003-2 and Formal Advisory Opinion No. 04-1).

2. The closing Lawyer must review all documents to be used in the transaction, resolve any errors in the paperwork, detect and resolve ambiguities in title or title defects, and otherwise act with competence. A Lawyer conducting a real estate closing may use documents prepared by others after ensuring their accuracy, making necessary revisions, and adopting the work.

3. A Lawyer who receives funds in connection with a real estate closing must deposit them into and disburse them from his/her trust account or the trust account of another Lawyer. (See Georgia Rule of Professional Conduct 1.15(II) and Formal Advisory Opinion No. 04-1).

OPINION:

A “witness only” closing occurs when an individual presides over the execution of deeds of conveyance and other closing documents but purports to do so merely as a witness and notary, not as someone who is practicing law. (UPL Advisory Opinion No. 2003-2). In order to protect the public from those not properly trained or qualified to render these services, Lawyers are required to “be in control of the closing process from beginning to end.” (Formal Advisory Opinion No. 00-3). A Lawyer who purports to handle a closing in the limited role of a witness violates the Georgia Rules of Professional Conduct.

In recent years many out-of-state lenders, including some of the largest banking institutions in the country, have changed the way they manage the real estate transactions they fund. The following practices of these lenders have been reported. These national lenders hire attorneys who agree to serve the limited role of presiding over the execution of the documents (i.e., “witness only” closings). In advance of a “witness only” closing an attorney typically receives “signing instructions” and a packet of documents prepared by the lender or at the lender’s direction. The instructions specifically warn the attorney NOT to review the documents or give legal advice to any of the parties to the transaction. The “witness only” attorney obtains the appropriate signatures on the documents, notarizes them, and returns them by mail to the lender or to a third party entity.

The Lawyer’s failure to review closing documents can facilitate foreclosure fraud, problems with title, and other errors that may not be detected until years later when the owner of a property attempts to refinance, sell or convey it.

A Lawyer must provide competent representation and must exercise independent professional judgment in rendering advice. (Rules 1.1 and 2.1, Georgia Rules of Professional Conduct). When a Lawyer agrees to serve as a mere figurehead, so that it appears there is a Lawyer “handling” a closing, the Lawyer violates his/her obligations under the Georgia Rules of Professional Conduct (Rule 8.4). The Lawyer’s acceptance of the closing documents or signature on the closing statement is the imprimatur of a successful transaction. Because UPL Advisory Opinion No. 2003-2 and the Supreme Court Order adopting it require (subject to the pro se exception) that only a Lawyer can close a real estate transaction, the Lawyer signing the closing statement or accepting the closing documents would be found to be doing so in his or her capacity as a Lawyer. Therefore, when a closing Lawyer purports to act merely as a witness, this is a misrepresentation of the Lawyer’s role in the transaction. Georgia Rule of Professional Conduct 8.4(a)(4) provides that it is professional misconduct for an attorney to engage in “conduct involving . . . misrepresentation.”

The Georgia Rules of Professional Conduct allow Lawyers to outsource both legal and nonlegal work. (See ABA Formal Advisory Opinion 08-451.) A Lawyer does not violate the Georgia Rules of Professional Conduct by receiving documents from the client or elsewhere for use in a closing transaction, even though the Lawyer has not supervised the preparation of the documents. However, the Lawyer is responsible for utilizing these documents in compliance with the Georgia Rules of Professional Conduct, and must review and adopt work used in a closing. Georgia law allows a title insurance company or other persons to examine records of title to real property, prepare abstracts of title, and issue related insurance. (O.C.G.A. § 15-19-53). Other persons may provide attorneys with paralegal and clerical services, so long as “at all times the attorney receiving the information or services shall maintain full professional and direct responsibility to his clients for the information and services received.” (O.C.G.A. § 15-19-54; also see UPL Advisory Opinion No. 2003-2 and Rules 5.3 and 5.5, Georgia Rules of Professional Conduct).

The obligation to review, revise, approve and adopt documents used in a real estate closing applies to the entire series of events that comprise a closing. (Formal Advisory Opinions No. 86-5 and 00-3, and UPL Advisory Opinion No. 2003-2). While the Supreme Court has not explicitly enumerated what all of those events are, they may include, but not be limited to: (i) rendering an opinion as to title and the resolution of any defects in marketable title; (ii) preparation of deeds of conveyance, including warranty deeds, quitclaim deeds, deeds to secure debt, and mortgage deeds; (iii) overseeing and participating in the execution of instruments conveying title; (iv) supervising the recordation of documents conveying title; and (v) in those situations where the Lawyer receives funds, depositing and disbursing those funds in accordance with Rule 1.15(II). Even if some of these steps are performed elsewhere, the Lawyer maintains full professional and direct responsibility for the entire transaction and for the services rendered to the client.

Finally, as in any transaction in which a Lawyer receives client funds, a Lawyer must comply with Georgia Rule of Professional Conduct 1.15(II) when handling a real estate closing. If the Lawyer receives funds on behalf of a client or in any other fiduciary capacity he/she must deposit the funds into, and administer them from, a trust account in accordance with Rule 1.15(II). (Formal Advisory Opinion No. 04-1). It should be noted that Georgia law also allows the lender to disburse funds. (O.C.G.A. § 44-14-13(a)(10)). A Lawyer violates the Georgia Rules of Professional Conduct when he/she delivers closing proceeds to a title company or to a third party settlement company for disbursement instead of depositing them into and disbursing them from an attorney escrow account.

1. Bar Rule 1.0 (p) provides that “Lawyer” denotes a person authorized by the Supreme Court of Georgia or its Rules to practice law in the State of Georgia, including persons admitted to practice in this state pro hac vice.

2. The result is to exclude Nonlawyers as defined by Bar Rule 1.0 (r), Domestic Lawyers as defined by Bar Rule 1.0 (h), and Foreign Lawyers as defined by Bar Rule 1.0 (j), from the real estate closing process.