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Legally speaking: When does writing an addendum become practicing law?

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This week involves what constitutes the practice of law when writing a contract…

Q: Sometimes in the course of negotiating a purchase contract I may write a contingency clause or an addendum. I am also often asked to explain the terms of the purchase contract. I have had attorneys who become involved in the transaction suggest that I am stepping over the line and could be found to be practicing law. Should I be concerned?

A: Possibly! Although I have not heard of any licensees in Ohio having been found to have practiced law without a license, I have seen many instances where the agent has clearly gone beyond what is permitted by Ohio law. How? By engaging in the following conduct that has been  identified by the Ohio Supreme Court as conduct that requires a license to practice law:

  • Drafting legal documents for another person or entity
  • Giving legal advice
  • Appearing in court proceedings on behalf of another person

With respect to drafting legal documents, Ohio law permits real estate licensees to fill in the blanks on pre-printed, form purchase contracts and leases. This conduct is permitted because it is viewed as falling within the ordinary course of a real estate licensee’s business duties. However, licensees are not permitted to draft purchase contracts (including clauses, addenda, etc), land contracts, deeds, leases, mortgages, or other legal instruments related to the sale or lease of real estate.

The biggest risk of a violation is when real estate agents and brokers draft lengthy contingencies or addendums to purchase contracts. To avoid problems in this area, brokers should have frequently requested contingencies or addendums drafted by legal counsel and available for their agents’ use (i.e., inspection contingencies, contingency for sale of purchaser’s existing home, financing contingency). Often such addenda are available through the local Board of REALTORS.

Brokers and their agents are also frequently asked for legal advice or to interpret a purchase contract or lease. Providing such advice or giving one’s interpretation can also put REALTORS at risk of engaging in the unauthorized practice of law. Brokers must assure that their agents are trained to refer such questions to legal counsel or other appropriate professionals (i.e., refer questions regarding tax implication to a CPA).

Sometimes in the property management area, a real estate licensee may attempt to appear in court on behalf of the property owner, usually in an eviction action. Under Ohio law this is not permitted. Because a law license is required to represent or appear in court on behalf of another person or entity, a property manager cannot represent an owner whose property he manages in an action to evict a tenant. However the property manager can testify as a witness as to the tenant’s failure to pay rent, or other facts that support the eviction.

 

Tags: legal, Legally Speaking