(But it only affects real estate peripherally)
The South Carolina Supreme Court handed down a UPL decision in a declaratory judgment action in its original jurisdiction on February 22.*
The Court accepted the action to determine whether Community Management Group, LLC and its employees engaged in the unauthorized practice of law while managing homeowners’ associations. The Court found that the respondents did, in fact, engage in UPL. At the outset of the case, the Court had issued a temporary injunction halting the offending activities.
Community Management Group, without the involvement of an attorney, prepared and recorded notices of liens and related documents; brought actions in magistrates’ courts to collect debts; and filed the resulting judgments in circuit courts. The entity also advertised that it would perform these services “in house”.
In a 1992 administrative order entitled In re Unauthorized Practice of Law Rules Proposed by South Carolina Bar**, the Court had modified prior case law to allow a business to be represented by a non-lawyer officer, agent or employee. The Court had also promulgated South Carolina Magistrate Court Rule 21, which provides, “A business…may be represented in a civil magistrates’ court by a non-lawyer officer, agent or employee…”
The central question in the action at hand was whether the word “agent” in these authorities includes third party entities and individuals like Community Management Group and its employees. The Court held it does not and was never intended to.
The Court had earlier held that filing claims in probate courts does not amount to UPL, but stated in the present case that it is the character of the services rendered that determines whether the services constitute the practice of law. Filing claims in Probate Court, according to the Court, does not require the professional judgment, specialized knowledge or ability of an attorney. The Court found that the services required to represent a business in magistrates’ courts are not comparable to filing claims in probate courts.
Community Management Group conceded that it prepared a lien document for the purpose of putting a cloud on title so property could not be sold unless the homeowner paid overdue assessments. This stated purpose demonstrated to the Court that the lien documents were “instruments”, that is, written legal documents that define rights, duties, entitlements or liabilities.
Citing a 1987 case near and dear to the hearts of all South Carolina dirt lawyers, State v. Buyers Service***, the Court reminded us that preparing and recording legal documents is the practice of law.
This current case is a Per Curiam decision, but acting Justice Pleicones did not participate. We are holding our collective breath to learn the results of a Quicken Loan case pending in the original jurisdiction of the Court, and the present case may give us at least a small hint.
We have already received an underwriting question about this case in our office. We were asked whether our attorney agents can ignore the liens filed in contravention of this case. The answer is that we can discuss the specifics on a case-by-case basis, but it appears that although the liens may be invalidated by a court, dirt lawyers and title companies should not generally take this risk without the involvement of a court. If you run into this issue in connection with your closings, call your title insurance underwriter to discuss your options!
*Rogers Townsend & Thomas, PC v. Peck, South Carolina Supreme Court Opinion 27707 (February 22, 2017)
**309 S.C. 304, 422 S.E.2d 123 (1992)
***292 S.C. 286, 468 S.E.2d 290 (1987)