Notary Or “Witness” Closings Won’t Be Coming To Massachusetts Yet: Attorneys Win Major Legal Victory

by Rich Vetstein on June 22, 2010 · 4 comments

in Closings, Massachusetts Real Estate Law

In a huge victory for Massachusetts real estate closing attorneys, a unanimous First Circuit federal appeals court has overturned a controversial lower court ruling which had opened the door for non-attorneys to conduct controversial “witness” or “notary” real estate closings in Massachusetts. The lower court ruling threatened to overturn long-standing statewide practice under which attorneys conduct real estate closings, and open the door for the influx of “notary” or “witness” closings where buyers and sellers receive no legal guidance during the closing.

The First Circuit decision is found here. The lower court ruling is here.

Massachusetts Courts Have Final Say

The First Circuit ruled that the Massachusetts state Supreme Judicial Court has the final say on whether attorneys must conduct real estate closings under rules governing the unauthorized practice of law. The case will now move to the SJC, which may be more hospitable to the real estate attorneys’ position. The federal appeals court also vacated a $900,000 attorney fee award against REBA.

REBA’s Position

REBA and its members believe that non-attorney closings only hurt the consumer. In recent years, the real estate closing process has become as more complicated than ever. A myriad of Fannie Mae guidelines, disclosure requirements, and RESPA rules require the parties to review, understand and execute dozens of dense legal forms and disclosures. In an attorney conducted closing, a trained lawyer will carefully review each document with the parties and answer any questions which may arise. (Click here for our post on everything a closing attorney does). In “witness only” or “notary” closings, however, the non-attorneys who conduct the closings do nothing more than witness the execution of the closing documents, and cannot provide any legal guidance.

“The purchase of a home is the most important investment most families will ever make,” REBA President Thomas Moriarty has said. “Home buyers and sellers, as well as lenders, rely on the training, professionalism, and integrity of attorneys to ensure that their property rights are protected. The reason that only lawyers – who are those trained in the law – can give legal advice is to protect the public,” Moriarty said. “This requirement gives the buyer someone to hold accountable. These multiple levels of protection permit buyers, sellers and lenders to confidently and reliably close loans worth hundreds of thousands of dollars every day.”

The Cost Factor: Debunking The Myth

The appeals court also dismissed the closing company’s claim that requiring attorneys to conduct closings was an unconstitutional restraint on trade which would result in higher closing costs. As REBA President Tom Moriarty notes, and I can personally attest, the typical attorney’s charges in connection with a closing have steadily fallen as a result of increased efficiency and competition. This is not a situation where there is one company that controls the market. There are thousands of attorneys throughout the Commonwealth who provide conveyancing and settlement services, and the competition among them is fierce. The typical closing fees are similar or less than those charged by the closing companies.

My Take

As a real estate attorney who has worked tirelessly to build my own practice, I have a rather huge professional stake interest in this case. Despite this, I cannot see how, for the same cost, borrowers and home buyers would benefit from having a non-attorney drone sit at a closing and simply notarize the dozens of complicated legal forms and refuse to answer any legal questions which may arise.  This is especially the case where the legal landscape keeps getting more and more complex. Further, a non-attorney notary cannot resolve many last minute closing issues which often arise, such as title issues, hold-backs, and indemnifications. Closings will become more inefficient and mistake prone.

This is, after all, the largest single purchase in most people’s lives. It’s not the time for do it yourself (DIY).

For more information about the unauthorized practice of law issue, please visit the REBA website.

  • Pingback: Battle Between Massachusetts Closing Attorneys vs. Settlement Service Providers Argued Before SJC | The Massachusetts Real Estate Law Blog()

  • Interesting article. I thought the deal was done and we would start to see notary closings. In New Hampshire…. though they are technically notary closings many of the title companies have lawyers do the closings. I also noticed that the fees are not much different.

  • Well put, Richard.

  • As I am a licensed loan officer in several states, and have seen first hand how valuable closing attorneys are, I applaud the First Circuit’s ruling. There have a been countless instances in the closings that I have attended where there have been important issues raised by buyer’s and sellers that attorney’s needed to respond to.

    There are currently transactions, such as Home Equity Loans and lines of credit, where the lenders do not require an attorney, but rather send a notary and I believe that this practice is dangerous.

    Are there highly competant and less competant conveying attorney’s? Absolutely. The author of this blog post is in the former category. Therefore, it is important to do your due diligence and ensure that you are represented by an attorney whose main or exclusive practice is real estate law and conveyancing.

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