When separate lawyers handle a real estate closing, what form of funds must the purchaser's lawyer use to disburse to the seller's lawyer, and who pays for certified funds?

Plain-English summary

In a real estate transaction, one attorney represented the seller and another the purchaser. The purchaser's attorney would close with the client and lender, then disburse funds to the seller's attorney, who had drawn the deed and would pay off existing mortgages, commissions, and other costs. The committee was asked what form of funds the purchaser's attorney had to use in disbursing to the seller's attorney, certified funds only, or also a cashier's check or an attorney's trust-account check backed by certified or cashier's funds plus conforming lender's funds under the Wet Settlement Act, Va. Code § 6.1-2.10. It was also asked whether the cost the purchaser's attorney incurred to secure a certified or cashier's check could be passed along to the seller's attorney and thus to the seller.

The committee concluded that its prior opinion requiring strict compliance with the Wet Settlement Act as to the form of funds acceptable for immediate disbursement (LE Op. 183) applied equally where purchaser and seller had separate counsel rather than a single closing attorney, so any disbursement of the purchaser's and lender's funds from the purchaser's attorney to the seller's attorney had to use a form of funds the Act enumerates. On the second question, it concluded that, consistent with LE Op. 1204, 1228, and 1346, the charge for securing funds in the required form could not be passed on to the other, separately represented party without that party's prior agreement.

Currency note

This opinion was issued in 1992, under Virginia's former Code of Professional Responsibility, before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000, and it turns on the Wet Settlement Act as then codified at Va. Code § 6.1-2.10. Subsequent statutory recodification (the Wet Settlement Act provisions have since been renumbered) and rule amendments may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current law before relying on any specific statutory citation or requirement mentioned here.

Common questions

Q: Does the Wet Settlement Act apply when buyer and seller have separate lawyers?

A: Under this 1992 opinion, yes. The committee held that the Act's strict requirements on the form of immediately disbursable funds apply even without a single closing attorney, so the purchaser's attorney's disbursement to the seller's attorney had to use a form of funds the Act allows.

Q: Can the purchaser's lawyer pass the cost of certified funds to the seller's side?

A: Not unilaterally. The committee held the charge for securing funds in the required form could not be passed to the other, separately represented party without that party's prior agreement.

Background and rules framework

The opinion turned on the Wet Settlement Act, Va. Code § 6.1-2.10, which governs the form of funds usable for immediate disbursement in Virginia real estate settlements, as applied through the committee's prior opinions rather than a specific Disciplinary Rule. The lawyer's handling of settlement funds is now addressed generally by Virginia Rule 1.15.

Citations and references

Statutes:

• Wet Settlement Act, Va. Code § 6.1-2.10 (form of funds for immediate disbursement in real estate settlements).

Other opinions cited:

• Virginia LE Op. 183: strict compliance with the Wet Settlement Act on the form of disbursable funds.
• Virginia LE Op. 1204, 1228, 1346: costs may not be passed to a separately represented party without prior agreement.

See also

• VA LEO 1565: Lender Instructions vs. Rescission
• VA LEO 1747: Honoring a Third-Party Assignment of Settlement Funds
• VA LEO 1865: Third-Party Liens on Settlement Funds

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1466.pdf

Original opinion text

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

Committee Opinion
June 22, 1992
LEGAL ETHICS OPINION 1466

REAL ESTATE REPRESENTATION:
APPLICATION OF THE WET
SETTLEMENT ACT TO REAL ESTATE
CLOSING HANDLED BY SEPARATE
ATTORNEYS FOR PURCHASER AND
SELLER.

You have indicated that a real estate transaction involves one attorney who represents the seller and another attorney who represents the purchaser. You further indicate that the attorney representing the purchaser will do the "closing" with his client and lender and then disburse funds to the seller's attorney who has drawn the deed and who will assume responsibility for paying off existing mortgages, real estate commissions and other costs. You have asked the Committee to opine as to the form of funds which must be used when the purchaser's attorney disburses to the seller's attorney. Specifically, you have inquired whether those funds must be disbursed in the form of certified funds only or may be disbursed in the form of certified funds or a cashier's check or in the form of an attorney's trust account check which is backed up by certified or cashier's funds received by the attorney from his client plus lender's funds which conform to the Wet Settlement Act, Va. Code § 6.1-2.10. You have also asked whether any cost incurred by the purchaser's attorney to secure a certified or cashier's check may be passed along to the seller's attorney and thus to the seller. As to your first inquiry, the Committee is of the opinion that the conclusions articulated in LEO Op. 183, requiring strict compliance with the Wet Settlement Act as to the form of funds acceptable for immediate disbursement in real estate settlements, are equally applicable to the circumstances you describe. Thus, the Committee opines that when the purchaser and seller in a real estate transaction each are represented by separate counsel rather than by one" settlement or closing attorney", any disbursement of purchaser's and lender's funds made to seller's attorney by purchaser's attorney must be made utilizing the form of funds enumerated in the Wet Settlement Act. With regard to your second inquiry, as to any cost incurred by purchaser's attorney for securing funds in the form required by the Wet Settlement Act, the Committee is of the opinion that its prior LE Op. 1204, LE Op. 1228, and LE Op. 1346 are dispositive of the issue. Thus, such charges may not be passed on to the other party, who is represented by separate counsel, without the other party's prior agreement.