Where's the line between "agent" and "lawyer"?

As with any blog post, this does not constitute legal advice. If you have a specific question, consult a specific attorney. 

Recents posts (first by Russ, then by Reba) have examined the role to be played in real estate transactions by agents and lawyers.  No doubt, everyone has a strong opinion based on their own personal experiences.  But what’s the law on the issue?

We all know that the seminal case on the issue is Cultum v. Heritage House Realtors, 103 Wn.2d 623 (1985). In that case, the buyer told the agent that she wanted to be able to inspect the home and rescind the contract based on her subjective interpretation of that inspection. Acting on this request, the agent used a form “drafted by an attorney” to include in the contract a very simple inspection contingency: “This offer is contingent on a satisfactory Structural Inspection, to be completed by 8/20/80.” The agent used the “single standard form” provided by the broker. The buyer performed a whole house inspection and was not satisfied with the results. The seller, however, refused to return the earnest money because the report did not objectively indicate any structural defficiencies.

The trial court found that the agent, in drafting the contingency, engaged in the practice of law.  The Supreme Court agreed, as the agent clearly created a document that affected the legal rights and obligations of the buyer. However, the Court decided that, in the interests of an efficient real estate market, an agent should be allowed to engage in the limited practice of law.  Thus, the Court concluded (using “agent” in place of “broker/salesperson”:

“[An agent] is permitted to complete simple printed standardized real estate forms, which forms must be approved by a lawyer, it being understood that these forms shall not be used for other than simple real estate transactions which arise in the usual course of the [agent’s] business and that such forms will be used only in connection with real estate transactions actually handled by such [agent] as [an agent] and then without charge for the simple service of completing the form.” 

However, “if [the agent] believes there may be complicated legal issues involved, he or she should persuade the parties to seek legal advice.” Moreover, “when completing form earnest money agreements, [the agent] must comply with the standard of care of a practicing attorney.” 103 Wn.d20 at 630-31.

So when does the agent cross the line and engage in the unauthorized practice of law?  Before rereading the case in response to the above posts, I thought that a Form 34 was a standing invitation for an agent to cross the line. However, that very probably is not correct. After all, the agent in Cultum wrote a simple contingency, and that fell within the Court’s rule allowing agents to practice law to a limited extent.  (The agent was ultimately liable for the buyer’s loss because the contingency was poorly written, but that’s another topic).

The answer, as suggested by the posts and the comments, turns on the complexity of the clause being inserted into the Form 34. If it’s a “complicated legal issue,” it’s not appropriate for an agent.  Seller wants to take chandelier?  Probably OK. Contract is contingent on events not directly within the control of the parties? Probably not OK. Unfortunately, there’s no bright line rule to be applied in every situation.

In light of that rule, should agents be trained in how to insert contractual language in a Form 34?  After reading Cultum, I think so. They have the legal authority to do so and almost certainly will if necessary to meet the needs of the client. If they can and will do so, then they should have appropriate training so that they can do so competently.

And a final note: should an agent review a non-client’s PSA? Well, the agent does so at his or her own risk, as that review clearly falls outside of the rule set by Cultum.  The review almost certainly constitutes the unauthorized practice of law.


48 thoughts on “Where's the line between "agent" and "lawyer"?

  1. Jillayne – how can’t you help? We’re doing pretty well in spite of our marketing, which basically entails talking to people when they ask us to and interacting with our users. And, I suppose, adding hearts to the site on Valentine’s Day.

    So pass on the word! We want home buyers to put it to the test while they’re looking for homes, so if you know any, send them our way.

Leave a Reply