Can a North Carolina lawyer take part in a real estate 'witness closing' when a nonlawyer may have searched the title without lawyer supervision?

Plain-English summary

An out-of-state lender asked a North Carolina lawyer to handle a limited "witness closing," consisting of overseeing execution of the loan documents, witnessing signatures, recording the deed of trust, copying documents without review, and disbursing proceeds. The lender obtained title insurance from an out-of-state insurer relying on an abstractor's notes, and the lawyer suspected the title search had been done by an unsupervised nonlawyer.

The opinion concluded the lawyer could not participate if her participation would further the unauthorized practice of law. It applied the then-current Rule 5.5(b) (no assisting a nonlawyer in the unauthorized practice of law) together with N.C. Gen. Stat. 84-2.1, which defines abstracting or passing on titles as the practice of law. The lawyer had to make a reasonable inquiry into who prepared the title search and opinion; if that inquiry indicated an unsupervised nonlawyer had done the work and her participation would further that unauthorized practice, she could not take part, but she could participate if the inquiry indicated no statutory violation.

The opinion also addressed the lawyer's duties if participation was permitted. To the borrowers, the lawyer had to make her limited role clear and obtain their agreement to it under Rule 1.2(c); if she represented them she owed competent representation under Rule 1.1, and if she did not represent them she had to tell them so and advise them to get separate counsel. She owed the same competence duty to the lender. Finally, the opinion concluded a lawyer could not sign a preliminary title opinion based on an independent contractor paralegal's abstract that the lawyer had neither reviewed nor supervised, because doing so would assist the unauthorized practice of law in violation of Rule 5.5(b).

Currency note

This opinion was issued in 1998, before North Carolina's adoption of the 2003 revisions to the Rules of Professional Conduct, and it cites the rule numbering then in effect (the relevant provisions were then Rule 5.5(b), Rule 5.3, Rule 1.1, and Rule 1.2(c)). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer do a limited witness closing for an out-of-state lender?

A: Only after inquiry. The opinion concluded the lawyer had to make a reasonable inquiry into who prepared the title work and could not participate if that inquiry showed an unsupervised nonlawyer abstracted the title or gave a title opinion and her participation would further that unauthorized practice.

Q: What did the lawyer owe the borrowers in a limited-role closing?

A: The opinion concluded the lawyer had to make her limited role clear and get the borrowers' agreement to it; if she did not represent them she had to advise them to obtain separate counsel, and if she did, she had to represent their interests competently.

Q: Could a lawyer sign a title opinion based on an unsupervised paralegal's abstract?

A: No. The opinion concluded that signing a preliminary opinion based on the title work of an unsupervised nonlawyer, whether employee or independent contractor, assisted the unauthorized practice of law in violation of Rule 5.5(b).

Background and rules framework

At the time, the opinion applied North Carolina's Rule 5.5(b) (assisting the unauthorized practice of law) and Rule 5.3 (supervision of nonlawyer assistants), read together with N.C. Gen. Stat. 84-2.1, which defines abstracting or passing on titles as the practice of law. It also applied Rule 1.1 (competence) and Rule 1.2(c) (limiting the scope of representation). In current numbering the subject matter corresponds to Model Rules 5.5, 5.3, 1.1, and 1.2.

Citations and references

Rules of Professional Conduct:

• N.C. Rule 5.5(b), 5.3, 1.1, 1.2(c) (then in effect)
• Current counterparts: Model Rule 5.5 (unauthorized practice); Model Rule 5.3 (nonlawyer assistance); Model Rule 1.1 (competence); Model Rule 1.2 (scope of representation)

Statutes:

• N.C. Gen. Stat. 84-2.1 (definition of the practice of law)

Other opinions cited:

• RPC 210: limited-role real estate representation and disclosure to borrowers
• RPC 216: lawyer's duty to supervise nonlawyers who assist in title work

See also

• NC State Bar Authorized Practice Advisory Op. 2002-1: Nonlawyer Closings
• ABA Formal Op. 506: Nonlawyer Assistants

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/98-formal-ethics-opinion-8/

Original opinion text

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

Inquiry #1:

Lender is located in another state but provides home loans to North Carolina residents. Lender asks Attorney, a licensed North Carolina lawyer, to close a loan for certain borrowers. Lender indicates that the following services will be required from Attorney: (1) oversight of the execution of the loan documents; (2) acknowledgment by an appropriate witness of the signatures of the borrowers on the documents; (3) recordation of Lender's deed of trust; (4) copying the loan documents without review; and (5) disbursement of the loan proceeds. Lender procures title insurance from an out-of-state title insurance company which issues title insurance binders in reliance upon the notes of a title abstractor. Attorney suspects that the title search was done by a non-lawyer who was not supervised by a North Carolina lawyer.

This type of closing is sometimes called a "witness closing." May Attorney participate in the closing?

Opinion #1:

No. Rule 5.5(b) provides, "[a] lawyer shall not assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law." N.C. Gen. Stat. §84-2.1 defines "practice [of] law" as, among other things, "abstracting or passing upon titles." Attorney must make a reasonable inquiry concerning the preparation of the title search and/or the title opinion. If Attorney believes, after making this reasonable inquiry, that a non-lawyer abstracted the title and/or gave a title opinion on the property without the proper supervision of a licensed North Carolina attorney and this unauthorized practice will be furthered by Attorney's participation in the closing under the conditions prescribed by Lender, she may not participate in the closing. However, Attorney may participate in the closing if Attorney's reasonable inquiry indicates that the statute was not violated.

Inquiry #2:

What duty does Attorney have to the borrowers?

Opinion #2:

If Attorney's representation is not prohibited by Rule 5.5(b), Attorney's duty to the borrowers is to ensure that her limited role in the closing is well understood and the borrowers agree to this limited role. See Rule 1.2(c). If she represents the borrowers, as well as Lender, she must competently represent their interests even if the objectives of her representation are limited. See Rule 1.1. Competent representation may include disclosure of any concerns that she may have about the preparation of the title opinion and the risks of relying upon the opinion. If Attorney does not represent the borrowers, they must be so advised and told that they should obtain separate legal counsel. See RPC 210. Attorney may represent the borrowers and Lender if she can do so impartially and without compromising the interests of any client. Id.

Inquiry #3:

What duty does Attorney have to Lender?

Opinion #3:

If Attorney's representation is not prohibited by Rule 5.5(b), Attorney must competently represent the interests of Lender. See Rule 1.1. Competent representation may include disclosure of any concerns that she may have about the preparation of the title opinion and the risks of relying upon the opinion.

Inquiry #4:

Title Insurance Company is located in another state but wants to write policies in North Carolina. Title Insurance Company contracts with a paralegal who is an independent contractor to search titles in North Carolina. Title Insurance Company asks Attorney to sign a preliminary opinion based upon the paralegal's abstract of title and/or preliminary opinion. Attorney has not reviewed the paralegal's title notes and did not supervise the paralegal's title research. May Attorney sign the preliminary opinion?

Opinion #4:

No, a lawyer has a duty to supervise any non-lawyer who assists her regardless of whether the non-lawyer is an employee of the lawyer, an independent contractor, or employed by another. Rule 5.3 and RPC 216. Execution of a preliminary title opinion that was prepared by an unsupervised non-lawyer is assisting the unauthorized practice of law in violation of Rule 5.5(b).