Clearly, one must be licensed to practice law. But defining what constitutes the practice of law is no easy task. In Ohio it has been generally defined as "the doing or performing of services in a court of justice, in any matter depending therein, throughout its various stages, and in conformity with the adopted rules of procedure. But in a larger sense it includes legal advice and counsel, and the preparation of legal instruments and contracts by which legal rights are secured, although such matter may or may not be pending in a court."
The Ohio statute on "unauthorized practice" is not of much help, either. It provides that "no person who is not licensed to practice law in this state shall... commit any act that is prohibited by the supreme court as being the unauthorized practice of law." Thus, in order to determine what constitutes the unauthorized practice of law, we must rely on case law.
The Ohio Supreme Court has held that "furnishing an opinion as to the condition or validity of title to real estate, whether in a so-called statement or certificate of title, falls within the realm of the practice of law." So the pertinent question is - do abstractors furnish an opinion as to the condition or validity of title?
Years ago, abstractors prepared abstracts of title. This was very different from the "title searching" we do today, and it really confuses the issue when we call what we do "abstracting." So, for purposes of this blog, I'll refer to the traditional creation of abstracts of title as "abstracting," and what we do today as "title searching."
Abstracting entailed copying pertinent information from all recorded documents in a chain of title into an abstract. The abstractor did nothing more than search the index and copy information from the documents found in the chain of title. It included everything without regard to whether it was released, or even valid. The practice of law came into the picture when someone, usually an attorney, examined the abstract for the purpose of giving an opinion of title.
Today, title searching entails more than simply abstracting documents. It is more or less a hybrid of abstracting and examining. Title searchers are expected to provide a report that strips out all of the documents that no longer affect title to property. For example, title searches do not show released mortgages or liens, or the releases, or other documents that in the searchers opinion no longer affect the title.
The difference between "examining the title" and "searching the title" was described in a 1930 treatise as follows:
The work of the lawyer who searches the various public offices in which the records affecting title to real estate are found in order to determine the ownership and condition of a particular tract of land may properly be termed an 'examining of the title.' On the other hand, the person who searches the records with no other object than to note down in more or less brief form the instruments and proceedings found therein and to use the same in making up the abstract, his work is more properly called 'searching the title.' He does not study the facts discovered by his search for their legal effect on the title. While he examines or reads the records and prepares a digest of their contents, his work is more or less mechanical... Where his work does not include the rendering of an opinion as to the validity of the title as disclosed by his search, he can not properly be termed a 'title examiner.' While the abstract is the result of a careful and accurate 'examination' of the records, together with the instruments found recorded therein, the process, taken as a whole, must be distinguished from the examination conducted by one learned in the law and whose duty it is to render an opinion as to the validity of the title.
The change from abstracting to title searching was predominately due to the introduction of title insurance. The unauthorized practice of law wasn't really an important concern because title companies were authorized to search the title, not to offer an opinion, but to determine its insurability. When the title searchers worked for the title company, there was also a sense that they were not providing services to another, but were rather acting as agents of their employer in the course of conducting its own affairs.
The explosive growth of independent title searchers made this much more complicated. Independent searchers were providing services to another, not their employer. This may explain the Rule being discussed in West Virginia.
A non-lawyer shall not undertake with or without compensation, direct or indirect, to advise another in any matter involving the application of legal principles to the ownership, use, disposition or encumbrance of real estate, except that, incident to his investigation of factual matters, he may give advice to his regular employer, other than in aid of his employer’s unauthorized practice of law, or to a licensed lawyer upon request of the lawyer, who assumes full responsibility for that advise.
The issue really seems to turn on whether or not the title searcher provides an opinion, or merely reports information. The Ohio Supreme Court addressed this issue in Dayton Bar Ass'n v. Lender's Service in 1988. The issue was whether providing property reports for a fee was the unauthorized practice of law.
The Court looked primarily at three prior holdings. First, that a title guaranty company was authorized by statute solely to prepare abstracts of title, and was not authorized to issue an opinion thereon.
Second, in an analogy to real estate sales contracts the Court applied the "simple instrument" doctrine - "the supplying of simple, factual material such as date, the price, the name of the purchaser, the location of the property, the date of giving possession and the duration of the offer requires ordinary intelligence rather than the skill peculiar to one trained and experienced in the law."
And, third, "one who furnishes to another a statement of the substance of documents or facts appearing on the public records, which affect the title real estate, without expressing any opinion as to the legal significance of what is found or as to the validity of the title, is not engaged in the practice of law."
The Dayton Bar argued that the use of terms such as "Present Title Holder" and "From Whom Acquired" indicated an expression of opinion. The Court held that the use of legal terms of art as headings was not on its own an expression of an opinion. It was also argued that exercising discretion in determining whether to report released or canceled liens was also the expression of an opinion. But, the Court found that Lender's Service provided clear instructions to omit any lien for which a release was filed, and they prohibited their searchers from examining the validity of such documents. Thus, the court found that providing property reports of this type was not the unauthorized practice of law.
The Lender's case is still not dis-positive on the issue. The property reports described in the case probably aren't what most people are providing today. They boiled it down to very mechanical procedures and made it a simple case of filling out a form. And, I believe that in 1988, Lenders Service employed their title searchers - rather than using independent searchers.
So, let's consider whether or not title searchers today employ "ordinary intelligence" or if they must utilize the skill of one trained and experienced in the law. If only ordinary intelligence is required, anyone can be a title searcher. I think most people would agree that something more than ordinary intelligence is required to properly prepare a modern title search. Many people on our forums have noted harm that is being caused by inexperienced title searchers. Though I don't believe that a law degree is necessary to be competent to search titles, certainly a title searcher must know something of the real estate laws that are applicable in the state in order to know what information to report.
I think the potential liability of a title searcher should be considered in this analysis. Consider, for example, the review of a foreclosure case in the course of searching the title. A true abstractor would have accurately documented the case with information necessary for the examiner to determine that good title passed to the purchaser at the sheriff's sale. Today, a title searcher is not expected to provide any information if the searcher is satisfied that the case was properly handled. A title searcher should be checking to ensure that everyone with an interest in the real estate was properly served and that the court ordered all of the valid liens released. If a lien was not disclosed during the course of the foreclosure, it would survive the judgment entry and a title defect would arise. By not showing any information from a foreclosure case, isn't the searcher providing an opinion that the purchaser acquired good title? And if that turns out not to be the case, wouldn't most expect that the title searcher would be liable for any claim that arises? It seems that everyone recognizes that a searcher is expected to exercise some judgment and opinion in preparing a title search and that is what crosses the line in to the unauthorized practice of law.
Basically, if all you are doing is writing down what you see in the public records, you are not engaged in the practice of law. However, in my opinion, if that is all you are doing, you are a poor title searcher; unless, of course, you are preparing full abstracts of title (which I doubt these days). More likely than not, title searchers are necessarily providing some opinion in the course of preparing a title search.
Thus, I think in the vast majority of situations today, title searchers are technically engaged in the unauthorized practice of law, at least to some degree. I don't believe that this has been an issue in many states because attorneys would most likely rather not spend their time digging through records at the courthouse. In some states, however, I think that attorneys feel that they have lost what used to be a staple of a real estate law practice. Most certainly there is some "protectionism" going on, but this doesn't mean that they aren't raising a valid concern.
It has been widely recognized that search standards have declined drastically over the past decade, or more. While this is not the fault of the searchers, it would most likely not have occurred if attorneys were still involved in the processes. Title companies and vendor management companies would not have been able to force their lax standards, and low fees, on licensed attorneys.
Ultimately, a finding that title searching is the practice of law could actually be a very good opportunity for professional, experienced title searchers. But what would have to happen is for title searchers to lobby for legislation that specifically authorizes them to engage in title searching, as well as create meaningful licensing requirements and standards that must be followed.
As I previously stated, I don't think a law degree is necessary to search titles. However, the state should be regulating it to ensure that only those who are well qualified, and well versed in the real estate laws, are permitted to engage in the profession. It is reckless to permit just anyone to provide a title search. I think we are seeing that now - as ALTA has stated, more than 1 in 3 title searches reveals a defect. Could that possibly be because an inexperienced searcher, told to follow lax standards, didn't turn up the problem at the last transaction?
This kind of regulation would be a blessing for title searchers. Clients would no longer be dictating sub-par search standards and they wouldn't be able to hire any inexperienced layperson willing to work for ridiculously low fees. If those title searchers were forced out of the business, licensed searchers would have more negotiating power to demand reasonable compensation for their work.
If states begin to recognize title searching as the practice of law, one of a few things would happen. First, title companies could go back to employing their title searchers. It would most likely not be considered the practice of law for title companies to search titles in order to determine insurability because there is no advice or opinion being supplied to another. Of course, this would force independent title searchers out of business.
Second, the work would all go attorneys, or their employees who would be hired to search titles under their supervision and control. Again, this would put independent title searchers out of business.
Third, the laws could be changed to allow title searchers to engage in the business of title searching subject to state regulation and control. Clearly, this would be the preferred option for title searchers, but it would require them to be proactive and lobby for such legislative changes.
I'm sure I'll draw a lot of criticism for suggesting that title searching is the practice of law. I welcome all comments. But, I don't think that title searchers can have it both ways - either title searching requires only "ordinary intelligence," which would leave the door open to fly-by-night, inexperienced searchers who will undercut the fees of professionals, or it requires special knowledge and expertise in real estate law, which infringes on the practice of law.