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How did Vermont Opinion 06-04 require lawyers to hold real estate closing funds?

Short answer Opinion 06-04 required closing funds held by a lawyer to go to pooled IOLTA unless substantial interest for a beneficiary was reasonably expected, and required overdraft notification on trust accounts under the then-current rules.
Bar
VTBAR
Issued
2006
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 2006. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.

Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
View original ethics opinion (PDF)

Plain-English summary

A lawyer or lawyer-operated title company asked whether real estate closing funds could be placed in a separate closing account and what trust-account requirements would apply. The committee said professional-conduct rules applied to lawyers handling closings in either a law firm or a separate closing, title, or escrow company.

It treated all funds delivered to the lawyer for a closing, whether from clients or third parties, as client funds for the applicable account rules. Usually, the short holding period meant the funds would not earn substantial interest for a beneficiary, so the opinion required pooled IOLTA. Longer or larger post-closing escrows could qualify for a separate interest-bearing account if substantial interest was reasonably expected; the opinion also addressed directions by clients or parties to hold funds for interest under an agreement.

The committee said every lawyer trust or escrow account, including separate accounts for post-closing funds, had to provide overdraft notification under then-current Rule 1.15C.

Currency note

This 2006 opinion applied former Rule 1.15C. Vermont Opinion 11-04 states that June 2009 amendments eliminated that provision and revised the account distinctions. Read the later opinion and current rules before relying on this historical account framework.

In practice

For the closing funds described, the committee applied the trust-account requirements regardless of whether the lawyer worked through a firm or a separate title company. It required an overdraft-notification account even where a qualifying post-closing escrow was kept outside pooled IOLTA.

Common questions

Q: Could a lawyer-operated title company avoid the lawyer trust rules?

A: No. The committee said the rules applied to lawyers handling closings in a law firm or a separate title, closing, or escrow company.

Q: When did the opinion allow a separate interest-bearing account?

A: It allowed one when the lawyer reasonably expected the funds to earn substantial interest for a beneficiary, including some larger or longer post-closing escrows.

Background and rules framework

The opinion applied Vermont Rules 1.15, 1.15A, 1.15B, and then-current 1.15C. It cited Vermont Opinion 2001-2 on lawyer-operated closing companies and representation of multiple parties in a real estate transaction.

Citations and references

Rules of Professional Conduct:

  • Vermont Rules of Professional Conduct 1.15, 1.15A, 1.15B, and former 1.15C

Other opinions cited:

  • Vermont Opinion 2001-2, concerning closing companies and multiple-party representation
  • Vermont Opinion 11-04, documenting later amendments to the account rules

See also

Source

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