Can a South Carolina lawyer supervise a HELOC closing (recordation and disbursement) without performing a title search when the lender's product requires no title work?

Plain-English summary

An out-of-state title insurance company asked a South Carolina lawyer, representing the lender, to supervise the closing of home equity lines of credit (HELOCs). The lender's HELOC product requires no title search and no title insurance, which the lender conveys to the lawyer as a blanket representation by email or in the closing instructions. The lawyer asked whether he could attend the closing and supervise recordation and disbursement consistent with Boone v. Quicken without performing a title exam or rendering a report on the status of title, and whether he owed an ethical duty to the lender or borrower for title defects a search might have revealed.

On the first question, the Committee concluded yes. In Boone v. Quicken Loans, the South Carolina Supreme Court identified the steps of a residential real estate transaction (title search and certification, preparation of instruments, closing, and recording and disbursement) and held each entails the practice of law and must be performed or supervised by a South Carolina lawyer to avoid unauthorized practice. The same lawyer need not perform every step, but a lawyer at the closing step must confirm that the other steps were completed by a South Carolina lawyer (Matter of Pstrak), and may not rely on a non-lawyer's blanket assurances that the other aspects had proper attorney involvement (Opinion 09-01). If the transaction included a title-search-and-certification component, that step would have to be done or supervised by a South Carolina lawyer. Here, though, the lender decided the transaction would include no title-search-and-certification component, and there is no risk of unauthorized practice where the activity that would constitute the practice of law is entirely absent. So the lawyer may supervise the steps that will occur (executing documents, recording, and disbursement), and the lender's decision to forego the title-search step does not implicate Rule 1.2(c).

On the second and third questions, the Committee declined to answer, because they raise the lawyer's standard of care rather than the application of the Rules of Professional Conduct.

In practice

Under this opinion, a South Carolina lawyer may supervise a HELOC closing, recordation, and disbursement without performing a title examination when the lender's product genuinely includes no title-search-and-certification step, because there is then no practice-of-law activity in that step to trigger Rule 5.5. The opinion holds that a closing lawyer must still confirm that any steps that do occur are performed by a South Carolina lawyer and may not rely on a non-lawyer's blanket assurances, and it declines to address the lawyer's standard of care or any malpractice exposure for undiscovered title defects.

Common questions

Q: Can a lawyer supervise a HELOC closing without doing a title search?

A: Yes, where the lender's product includes no title search. The opinion concludes there is no unauthorized practice when the title-examination activity that would constitute the practice of law is entirely absent.

Q: Must the same lawyer perform every step of a real estate transaction?

A: No. The opinion explains that under Boone v. Quicken the steps need not be done by the same lawyer, but the closing lawyer must confirm the other steps were completed by a South Carolina lawyer.

Q: Can the lawyer rely on a non-lawyer's assurance that other steps had attorney involvement?

A: No. The opinion concludes a closing lawyer may not rely on a non-lawyer's blanket assurances that the other aspects of the closing had the proper level of attorney involvement.

Q: Does the lawyer owe a duty for title defects a search would have found?

A: The opinion does not decide that. It declined to answer, treating the lawyer's duty for undiscovered title defects as a standard-of-care question rather than a Rules of Professional Conduct question.

Background and rules framework

The opinion interprets Rule 5.5 (unauthorized practice of law) in the residential real estate context defined by Boone v. Quicken Loans, and addresses Rule 1.2(c) (limiting the scope of representation) only to note that the lender's omission of the title-search step does not implicate it. South Carolina's rules correspond to the ABA Model Rules. The Committee relied on Boone, Matter of Pstrak, Ex parte Watson, and its Opinion 09-01.

Citations and references

Rules of Professional Conduct:

• MR 5.5 / SC RPC 5.5 (unauthorized practice of law)
• MR 1.2 / SC RPC 1.2(c) (limiting the scope of representation)

Cases:

• Boone v. Quicken Loans, Inc., 420 S.C. 452, 803 S.E.2d 707 (2017), steps of a residential real estate transaction constituting the practice of law.
• Matter of Pstrak, 357 S.C. 1, 591 S.E.2d 623 (2004), the closing lawyer's duty to confirm attorney involvement in other steps.
• Ex parte Watson, 356 S.C. 432, 589 S.E.2d 760 (2003), attorney review of a title abstractor's report.

Other opinions cited:

• S.C. Bar EAC Op. 09-01: a closing lawyer may not rely on a non-lawyer's blanket assurances.

See also

• SC Bar Ethics Op. 23-02: Supervising an Out-of-State Associate on South Carolina Matters
• ABA Formal Op. 506: Responsibilities Regarding Nonlawyer Assistants

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-opinion-26-01/
• Original PDF: https://www.scbar.org/media/rzial3el/eao-26-01-final.pdf

Original opinion text

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

Ethics Advisory Opinion

26-01

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER'S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

S.C. Rule of Professional Conduct 5.5

Facts:

Lawyer has been contacted by an out of state title insurance company or a company who would otherwise conduct the entire closing in those states which do not require Lawyer supervision (Title States) to supervise the Closing of Home Equity Lines of Credit (HELOC). Lawyer represents the Lender. Lender's HELOC product does not require a title search, nor does it require title insurance for this product. Lender conveys this to Lawyer as a blanket representation in the form of an email or in the Closing Instructions.

Questions Presented:

1. May Lawyer attend the closing and supervise recordation and disbursement of funds in a manner consistent with Boone v. Quicken, et. al., without violating the SC Rules of Professional Conduct if Lawyer does not perform a Title Exam or render a Report on the Status of Title?

2. Same facts as #1, does Lawyer have an ethical duty to Lender or its successors and or assigns for any title defects which may have been discovered had a Title Search been performed in a manner consistent with SC Law and the SC Rules of Professional Conduct (assuming proper limitation of representation under Rule 1.2, SCRPC)?

3. Same facts as #1, does Lawyer have an ethical duty to Borrower for any title defects which may have been discovered had a Title Search been performed in a manner consistent with SC Law and Rules of Professional Conduct (assuming proper limitation of representation under Rule 1.2, SCRPC)?

Summary:

As to Question 1:

Yes, Lawyer may attend the closing and supervise recordation and disbursement of funds in a manner consistent with Boone v. Quicken, et. al., without violating the SC Rules of Professional Conduct regardless of whether Lawyer performs a Title Exam or renders a Report on the Status of Title.

As to Question 2:

The Committee declines to answer Question 2 because it raises a question as to the standard of care of Lawyer rather than the application of the SC Rules of Professional Conduct.

As to Question 3:

The Committee declines to answer Question 3 because it raises a question as to the standard of care of Lawyer rather than the application of the SC Rules of Professional Conduct.

Opinion:

In Boone v. Quicken Loans, Inc., 420 S.C. 452, 803 S.E.2d 707 (2017), the South Carolina Supreme Court reiterated and clarified what activities constitute the practice of law in the context of a residential real estate transaction (including HELOC transactions). The Court confirmed that there are five steps in a residential real estate transaction: "Title Search and Certification", "Preparation of Instruments," "Closing the Transaction," and "Recording and Disbursement" (considered jointly as the final step). The Boone opinion makes clear that each of those steps entails the practice of law when done in connection with a residential real estate transaction, and must therefore be performed or supervised by a South Carolina licensed lawyer to avoid the unauthorized practice of law. Id., Rule 5.5, SC RPC.

There is no requirement that each step be performed by the same licensed lawyer. However, a lawyer involved at the closing step of the transaction has an obligation to confirm that the other steps in the same transaction were completed by a licensed South Carolina lawyer. Matter of Pstrak, 357 S.C. 1, 591 S.E.2d 623 (2004). Further, the closing lawyer may not rely on mere blanket assurances from a non-lawyer that all other aspects of the closing have the proper level of attorney involvement. See SC Ethics Advisory Opinion 09-01 and citations therein.

If the Lender included a Title Search and Certification component for the transaction, clearly that step would have to be done directly or under the supervision of a South Carolina licensed lawyer. Boone (citing Ex parte Watson, 356 S.C. 432, 436, 589 S.E.2d 760, 762 (2003) ("if a licensed attorney reviews the title abstractor's report and vouches for its legal sufficiency by signing the report, title abstractors would not be engaged in the unauthorized practice of law.")). Under the facts of the inquiry, however, Lender has decided that the transaction will not include a Title Search and Certification component. There is no risk of the unauthorized practice of law if there is a complete absence of the sort of activity that would constitute the practice of law when completed.

Here, Lender has engaged Lawyer to perform and/or supervise the steps of the transaction that will be completed: execution of documents at closing, recording, and disbursement. On these facts, the Committee does not believe that the Lender's decision to forego the Title Search and Certification step implicates Rule 1.2(c).