How do the restrictions on the unauthorized practice of law apply to South Carolina lawyers who are involved in real estate transactions?
Answer: The Committee frequently receives inquiries from lawyers regarding the application of the prohibition against the unauthorized practice of law to real estate transactions. In the typical inquiry a lender -- sometimes one located out of state, sometimes one locally based -- wishes to cut costs by reducing lawyer involvement in some aspect of a real estate transaction, often the closing.
The Committee's jurisdiction only extends to issues of professional conduct and does not include questions of law, including what constitutes the unauthorized practice law. Thus, the Committee is unable to issue opinions in response to these inquiries. See S.C. Ethics Adv. Op. #97-24.
The South Carolina Supreme Court has issued several major decisions on the application of the prohibition against the unauthorized practice of law to real estate transactions:
(1) State v. Buyers Service Co., Inc. , 292 S.C. 426, 357 S.E.2d 15 (1987);
(2) In re Lester, 353 S.C. 246, 247, 578 S.E.2d 7 (2003);
(3) Doe v. McMaster 355 S.C. 306, 585 S.E.2d 773 (2003);
(4) Ex Parte Watson, 356 S.C. 432, 589 S.E. 2d 760 (2003); and
(5) In re Pstrak, 357 S.C. 1, 591 S.E.2d 623 (2004).
Attorneys are advised to read these opinions carefully for guidance. While the Committee cannot issue a formal opinion on unauthorized practice issues, the consensus of the Committee is that a fair reading of these cases indicates that all aspects of real estate transactions must be conducted or supervised by lawyers. See Watson , 589 S.E.2d at 761. In addition, the cases have indicated specifically that a lawyer should be “physically present” at a closing. See Lester, 578 S.E.2d at 7.
The Committee has and will continue to issue opinions dealing with other ethical issues arising from real estate transactions, particularly conflicts of interest. See, e.g., S.C. Bar Ethics Adv. Op. #02-16 and 00-17.