Hot on the Hotline: Buyer and Seller requests raise questions about unauthorized practice of law
Victoria (Vicki) M. Munson
Legal Hotline Attorney
“Can I help with this?” Buyer and Seller requests raise questions about unauthorized practice of law
Two recent calls to the Illinois REALTORS® Legal Hotline concerned how to manage requests for assistance with a real estate-related transaction. In both situations, it’s important to look closely at the broker’s role and determine whether the action constitutes brokerage services or unauthorized practice of law.
A broker asked, “Buyer and Seller come to me and ask if I can “do the paperwork” for their FSBO deal. May I prepare their contract?”
Ask yourself the following: “Will you be providing any brokerage services? and if so, who is your client?”
First, Section 1-10 of the Real Estate License Act provides a list of licensed activities including
(3) Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental or leasing of real estate…
(9) Assists or directs in the negotiation of any transaction intended to result in the sale, exchange, lease or rental of real estate…
Examine your discussions so far with the parties. Have the Buyer and Seller determined all the terms and conditions of their deal? If the answer is yes, you should direct the Buyer and Seller to obtain the services of an attorney to prepare their contract. The concern here is that you may be outside the protections of the common law in Illinois related to the unauthorized practice of law. As a broker you are permitted to complete business and factual information on a purchase contract form that is commonly used in the community where this is done incidentally to acting as a broker in the transaction. [Chicago Bar Association v. Quinlan and Tyson, Inc. 34 Ill.2d 117, 1966]. If you have not provided any brokerage services and proceed with preparing the contract, it may constitute the unauthorized practice of law.
However, if, for example, you will be assisting at least one of the parties, while perhaps treating the other as a customer, make the proper designated agency disclosure and disclosure of no agency to the customer. Then assist with the negotiations for the transaction, once you have determined which party you represent and after making the appropriate disclosures you could complete business and factual information on the form purchase offer, presenting it to the other party and advising your client regarding negotiations. Document the brokerage services provided.
Another broker had this question: “I represent a Buyer who has received correspondence from the Seller’s attorney concerning proposed modifications to the purchase contract. The Buyer does not have her own attorney. Can I help the Buyer respond to the attorney’s letter?”
No. Article 13 of the NAR Code of Ethics states “REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.” In this situation, you would be advising the Buyer on legal matters that fall outside the scope of your license. You should suggest to the Buyer that she seek the advice of a licensed attorney concerning this matter. If the Buyer is adamant about not seeking an attorney to represent her, advise the Buyer that she will have to respond to the Seller’s attorney on her own and that you will not be able to assist her for that particular activity.
About the writer: Prior to joining Illinois REALTORS® in 2022, Victoria (Vicki) Munson was an attorney in private practice focusing on real estate and estate planning matters. She enjoyed assisting buyers and sellers in bringing their transactions to the closing table. Victoria earned her bachelor’s degree from Western Illinois University and her Juris Doctor from The John Marshall Law School.
