RE Agents: Unauthorized Practice of Law

Real estate agents play a crucial role in facilitating property transactions and guide buyers and sellers through the process of buying or selling real estate. However, the line between providing knowledgeable assistance based on experience, and engaging in the unauthorized practice of law (UPL) can sometimes become blurry. Overstepping this boundary can expose agents to legal liability, professional consequences, and more.

What is unauthorized practice of law by a real estate agent?

Unauthorized practice of law refers to the performance of legal services by someone who is not licensed to practice law. The legal profession is regulated in every state to ensure that only qualified and approved individuals provide legal advice or services. UPL laws vary by jurisdiction, but common activities considered UPL include drafting or altering legal documents and giving legal advice or interpretations.

For real estate agents, the risk of UPL arises when they attempt to perform tasks traditionally reserved for licensed attorneys under the guise of providing exceptional or “above and beyond” service. While helping clients navigate real estate transactions is part of an agent’s job, certain actions may inadvertently cross into the legal domain.

Examples of Unauthorized Practice of Law by Real Estate Agents

1. Drafting or Modifying Contracts. Real estate contracts, such as purchase agreements or leases, are legal documents that establish binding obligations between parties. Agents may use standard templates, such as those provided by OREC, but modifying these forms to fit unique circumstances can constitute UPL. For instance, altering clauses to reflect a seller’s specific request or including a contingency without legal oversight may be seen as drafting a legal document.
2. Providing Legal Interpretations. Agents are often asked for advice about contractual terms, legal implications of contingencies, or the enforceability of certain clauses. Offering definitive answers or interpretations can be construed as providing legal advice.
3. Advising on Title or Ownership Issues. Issues related to title disputes, liens, or ownership structures are inherently legal matters. Agents who attempt to resolve or provide advice on these issues without attorney involvement risk crossing the line into UPL.
4. Negotiating on Behalf of a Client. While negotiating sale terms is part of an agent’s role, negotiations that delve into legal ramifications, such as determining remedies for breach of contract, may be considered UPL.
5. Handling Disputes Between Parties. Acting as a mediator or resolving conflicts that involve legal rights, responsibilities, or interpretations of the law falls outside the scope of a real estate agent’s expertise. Avenue Legal Group handles various real estate disputes and litigation, and our team would be happy to discuss your (or your client’s) matter.

Risks for Agents Engaging in the Unauthorized Practice of Law

1. Possible Legal Liability. UPL is a violation of the law in every state and can lead to fines, penalties, or even criminal charges. In addition, clients who believe they were harmed by an agent’s unauthorized legal advice may sue for damages.
2. Professional Consequences. State licensing boards such as OREC take allegations of UPL seriously. If found guilty, agents may face disciplinary action, including suspension or revocation of their real estate license.
3. Damage to Reputation. Allegations of UPL can tarnish an agent’s professional reputation, leading to loss of trust among clients and peers. The resulting damage to your business could be long-lasting.
4. Unintended Consequences for Clients. When agents step into a legal role without proper qualifications, they risk providing incorrect or incomplete advice. This can lead to unintended legal consequences for clients, potentially derailing transactions or resulting in financial losses.

How Real Estate Agents Can Avoid Unauthorized Practice of Law

While the risks are significant, they can be mitigated through careful practices and adherence to professional boundaries. Here are strategies to avoid UPL claims:

1. Understand the Limits of Agent and Broker Licenses. Clearly define your responsibilities as a real estate agent and broker. This will ensure clients understand the services you can and cannot provide. Your role is to facilitate transactions, not to offer legal counsel and analysis of every possible legal outcome.
2. Use Standard Forms and Templates. Fortunately, OREC provides Oklahoma realtors, agents, and brokers with standard contract forms that comply with Oklahoma’s legal requirements for real estate transactions. Stick to these templates and avoid modifying them unless directed by an knowledgeable attorney.
3. Refer Legal Questions to A Trusted Attorney. Adding a real estate attorney to your team can prove extremely useful. When clients have questions about legal implications, such as title issues, contract terms, or disputes, refer them to a qualified real estate attorney. Many of our broker, agent, and property management clients involve our firm throughout a transaction to ensure proper legal oversight.
4. Document Your Work and Interactions. Keep detailed records of communications with clients and opposing parties, especially when discussing contract terms or legal questions. When you refer clients to attorneys, these records are extremely useful. as this can serve as evidence of your compliance with UPL laws.
5. Avoid Offering Opinions. Even casual comments about the enforceability of a contract or potential legal outcomes can be construed as providing legal advice. Be cautious in your language and defer such questions to legal professionals.
6. Train Your Team. If you work with a team or brokerage, ensure that all team members understand the boundaries of their roles and the importance of avoiding UPL. Regular training sessions can reinforce best practices. Avenue Legal Group offers Oklahoma real estate agent CE courses, which can be scheduled specifically for your team.

Work With Trusted Oklahoma Real Estate Attorneys

If you have any questions or need assistance with your real estate transactions or managing an accusation of UPL, please contact our firm. We focus our practice on helping real estate professionals and investors navigate legal complexities with confidence.