Can you be charged with the unauthorized practice of law?

The Tennessee Supreme Court has ruled that it is in the public's interest to permit real estate licensee to fill in the blanks of standardized contract forms used for simple real estate transactions. Conditions for this authorization include that:

  • The forms have been prepared by, approved by, reviewed by an attorney.
  • The forms are used in transactions handled by the real estate licensee in the usual course of his or her real estate business.

Even when the original form has been prepared by, approved by or reviewed by an attorney, additional clauses may not be added to a preprinted contract.

A real estate licensee is not authorized to draft original legal documents, such as:

  • Deeds
  • Earnest money agreements
  • Leases
  • Mortgages

Courts have prohibited real estate licensees from drafting or filling in the blanks on deeds, mortgages, or other documents after the signing of the sales contract, because these acts are not incident to the business of buying and selling real estate, but rather verifying or transferring title.

Simple real estate transactions traditionally are limited to transactions in which the property is conveyed outright and does not include easements, rights-of-way, or any other limitations of ownership.

If a transaction involves anything but a simple conveyance of land, the real estate licensee should advise parties to seek legal counsel for specific advice on how to create those legal rights.

A real estate licensee may not render opinions or counsel buyers and sellers on:

  • The legal rights of parties
  • The legal effect of documents
  • The validity of title to real estate.
  • Whether the seller should agree to a contract or deed or take back a mortgage.
  • Whether the buyer should take title in joint tenancy with a spouse, or individually.
  • Whether a promissory note should be with or without recourse.
  • Whether or not a mortgage is assumable.

Liability for the unauthorized practice of law can be avoided by:

  • Refraining from any activities that could be construed as the unauthorized practice of law;
  • Referring to legal counsel all questions concerning the meaning or effect of any contractual provision (even when using standard form contracts);
  • Advising clients and customers to seek legal review of any contract where, in the licensee's judgment, the client or customer needs such legal guidance;
  • Avoiding expressions of opinion, which may be misconstrued as a legal opinion.

Consequences for the unauthorized practice of law may result in:

  • Discipline from the REALTOR®S Professional Standards Committee – Article 13 Code of Ethics
  • Loss of commission.
  • Liability for client's financial losses. (Damages)
  • Court Injunction to cease and desist from any further unauthorized practice of law.
  • Loss of real estate license.