As buyers and sellers continue to demand greater service from real estate licensees and contracts to purchase become increasingly complicated, a growing area of concern for brokers should be that of the unauthorized practice of law.
The following conduct has been determined by the Ohio Supreme Court to require a license to practice law:
- Drafting legal documents for another
- Rendering legal advice
- Appearing in court proceedings on behalf of another person
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 perceived as falling within the ordinary course of a licensee’s business duties.
- Licensees are not permitted to draft purchase contracts, land contracts, deeds, leases, mortgages, or other legal instruments related to the sale or lease of real estate.
- Potential violations can occur where licensees 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, right of first refusal).
- Licensees should also not agree to merely write a purchase contract on behalf of buyers and sellers for a flat fee without providing any other real estate related services.
Providing Legal Advice
- Brokers and their agents are frequently asked for legal advice or to interpret a purchase contract or lease, or to render an opinion as to title by the parties to the transaction. Providing such advice or giving one’s interpretation constitutes 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).
Appearing in Legal Proceedings
- Brokers and salespersons may not appear in court on behalf of their clients; therefore, a property manager may not represent or appear in court on behalf of an owner whose property he manages in an action to evict a tenant.
- Nor can a broker represent an affiliated salesperson in a disciplinary hearing before the Ohio Real Estate Commission.