You have presented a hypothetical situation in which Attorney has received a contract concerning
a real estate transaction showing that Attorney will be the settlement agent. The contract has an
addendum which indicates that the settlement agent was chosen by the purchaser and that seller will
have a separate attorney. The contract states, "Fees for the preparation of the deed, that portion of
the Settlement Agent's fee billed to the Seller, costs of releasing existing encumbrances, appropriate
legal fees and any other proper charges assessed to the Seller shall be paid by the Seller."
Subsequently, Attorney receives a letter from a title company stating: 1) that the title company has
been retained to represent the seller; 2) that the title company will prepare the seller's documents,
including the deed, the Certificate of Satisfaction, etc.; and 3) that Attorney's settlement statement
should show no charges to the seller from Attorney. The letter further states that the title company's
fee to the seller should be shown on the settlement statement, payable to the title company, and that
seller will sign all documents in the title company's office.
Under the facts you have presented, you have asked the committee to opine on the following
The appropriate and controlling rules relative to your inquiry are: Rule 1.5 (b), requiring that fees
be adequately explained to the client; Rule 5.4 (a) which prohibits a lawyer from sharing fees with
a nonlawyer; Rules 5.4 (b) and (d) which generally prohibit a lawyer from practicing law as an
employee of a corporation owned or controlled by nonlawyers; and Rule 5.5 (a)(2), stating that 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.
The committee has previously opined, in the context of a real estate closing, that absent an
agreement with or forewarning to the seller or seller's attorney, it is improper for a closing attorney
engaged by the purchaser to impose certain fees on the seller. LEOs 425, 647, 878, 911,(1) 922, 927,
1177, 1228, and 1346.
Your inquiry raises the question of whether these opinions apply if the seller is represented by a lay
title company as opposed to a licensed attorney. The conclusion reached in these opinions was not
based, however, on whether the seller was separately represented. As we stated in LEO 1346, "if
purchaser's attorney undertakes to perform those functions on behalf of the seller, the fees for the
services first must be adequately explained to the seller who must then, after consulting with his own
attorney, consent to the charge before it can be imposed on the seller." LEO 1346 (1990). The
committee believes that Rule 1.5 (b)'s requirement that fees be adequately explained to a client
would require advance notice and agreement by the seller, even if the seller has not engaged
independent counsel. In that case, the closing attorney would be representing the seller as well as
the purchaser. Pickus v. Virginia State Bar, 232 Va. 5, 348 S.E.2d 202 (1986)(When a lawyer acts
as a closing or settlement attorney and no other lawyer is involved, the closing or settlement attorney
represents all the parties and, in this limited sense, all the parties are his clients). Regardless of
whether the title company is authorized to represent the seller, the seller must consent to the charges
imposed by the closing attorney. This requires notice to the seller that he or she will be charged for
certain fees or costs by the closing attorney sufficiently in advance of the closing. The purpose is
to provide an opportunity for the seller, if he or she chooses, to avoid the imposition of charges for
the performance of certain ministerial functions. LEO 1228.
In the companion opinion issued by the Standing Committee on the Unauthorized Practice of Law,
that committee determined that the lay title company which is the subject of your inquiry could not
lawfully undertake a legal representation of the seller. UPL Op. 197 (2000). The UPL committee
opined that no employee of the title company is authorized to give legal advice to the seller nor
prepare on the seller's behalf legal instruments affecting the title to real estate such as a deed transferring title to the purchaser.
Id. Therefore, the UPL committee concluded that the closing attorney
may regard the seller as unrepresented by independent counsel. This means, for example, that the
closing attorney may communicate directly with the seller to obtain consent regarding the fees and
costs the closing attorney intends to charge to the seller without violating Rule 4.2 of the Virginia
Rules of Professional Conduct.(2)
As to your second inquiry, if the closing attorney complies with the instructions of the title company,
the committee believes that the closing attorney would be assisting a person who is not a member
of the bar in the performance of activity that constitutes the unauthorized practice of law. Rule 5.5
(a)(2). In the facts you present, the closing attorney would be disbursing to the title company
payment for the preparation of the seller's deed, knowing that the title company is not authorized
to practice law. Such conduct, in the committee's opinion, is violative of Rule 5.5 (a)(2).
With regard to your third and fourth inquiries, the committee agrees with the distinction drawn by
the UPL committee in UPL Op. 197 between a lawyer who is an employee of the title company as
opposed to a lawyer in private practice who simply owns the title company. If the seller were
represented by a licensed attorney in private practice and that attorney also owns the title company,
the attorney could properly advise the seller and prepare legal instruments on seller's behalf, subject
to the ethical obligations discussed in LEO 1564 concerning lawyer-owned title companies. In
contrast, if the attorney owns the title company but is working not as the seller's private attorney but
on behalf of the title company, then that attorney should not be treated by the purchaser's attorney
as representing the seller. Only an attorney engaged in private practice specifically retained by the
seller may undertake legal representation of the seller. Similarly, if the licensed attorney is
employed directly by the title company, and subject to its control, it would not be proper for the
lawyer to provide legal services to customers of the title company. Rule 5.4 (a) prohibits the lawyer
from sharing legal fees with the title company. Rules 5.4 (b) and (d) generally prohibit a lawyer
from providing legal services or practicing law within a corporation owned by nonlawyers. Since
the title company is not authorized by law to serve as the seller's legal representative at closing, the
committee believes that the seller should not be regarded as represented by their own counsel.
June 26, 2000
1. It is no longer permissible for the buyer's (or lender's) attorney to charge the seller for the preparation and filing of an IRS Form 1099-S. I.R.C. § 6045 (e)(3). This provision overruled, in part, LEOs 911, 922 and 927.
2. In representing a client, a lawyer shall not communicate about the subject matter of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.