SC Supreme Court publishes new commentary on social media

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Real estate lawyers are involved in two disciplinary cases

Two disciplinary cases* were published by the South Carolina Supreme Court on April 19 concerning lawyers involved in multi-state mortgage modification practices. Stay tuned for a blog on the mortgage modification issues because Palmetto State dirt lawyers should steer clear of the unauthorized practice of law and other prickly issues these practices may trigger.

But ostensibly even more pressing, the Court provided ample guidance on lawyer marketing in the context of social media. Using websites and social media in marketing effort is common in 2017 for most lawyers.

The lawyers in these cases failed to adequately monitor the individuals (staff members and third parties) who handled these marketing efforts for their practices.  Failure to properly supervise these effort resulted in running afoul of the Rules of Professional Responsibility.

Dirt lawyers, here are some practices you should avoid taking in your marketing efforts:

  • You should not “cut and paste” from other lawyers’ websites without scrutinizing the materials.
  • If you are a sole practitioner, your website and other marketing materials should not indicate your practice includes “attorneys” or “lawyers”.
  • You should not exaggerate your years of experience.
  • You should not use the word “expert” except in those areas where you are certified as a specialist by the Supreme Court.
  • You should not advertise practice areas where you have no experience in those areas and where you do not intend to take cases in those areas.
  • You should not congratulate clients on their closings without obtaining the clients’ permission to post their names and other information about their legal matters on social media. I see (and “like”) lots of these congratulatory messages on Facebook, and these messages are not objectionable if the lawyer has obtained the clients’ consent.
  • Your marketing materials should not refer to your legal services as “best”.
  • You should not advertise special discounted rates for legal services without disclosing whether or not these rates include anticipated costs.
  • You should not compare your services to other attorneys in ways that cannot be factually substantiated.
  • You should not allow third party vendors to identify themselves as employees of your firm when communicating with prospective clients.

Not many of us are “experts” in the area of attorney advertising, but I strongly recommend that you pay close attention to the Rules in all aspects of website development and social media use. Unlike most areas of the law, the Rules of Professional Responsibility that control advertising appear to be somewhat “black and white”. And failure to follow these Rules will anger your fellow lawyers and will likely to land you in the Advance Sheets. Be careful out there!

 

In the Matter of Bacon, S.C. Supreme Court Opinion 27710, April 19, 2017; In the Matter of Emery, S.C. Supreme Court Opinion 27712, April 19, 2017.

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Dirt lawyers: guard your clients and your offices against sloppy title search practices

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Our Supreme Court has made it crystal clear that searching titles is the practice of law. For every real estate closing, the closing attorney should perform or supervise the title examination. Theoretically, all title insurance and malpractice claims caused by title search errors can be prevented. Having safe title examination practices in real estate closing offices would go a long way toward minimizing claims and protecting clients and their properties!

The following are some dangerous practices that lead to claims:

  • Hiring title examiners who are inexperienced, who cut corners and who are not covered by errors and omissions insurance coverage.
  • Failing to properly instruct title examiners as to how titles should be searched. Whether law firm employees or outside abstractors are used, the closing attorney should develop and use his or her own set of title examining procedures.
  • Failing to require title examiners to pull documents. It is not sufficient to search titles using indexes. Doing so puts the lawyer and client at the mercy of the county employee who typed the index.
  • Failing to review chain documents. The attorney should review chain documents. Attorneys spot issues that are missed by abstractors. If a link in the chain of title is a foreclosure or an estate, the foreclosure file or the estate file should be reviewed.
  • Failing to use proper search periods. The long-standing search period standard in South Carolina is sixty years. Title insurance companies have shortened this standard to forty years, particularly for residential transactions. But some title insurance companies and sloppy practitioners are allowing for much shorter periods of time, like ten years, or “up from the developer” or “up from the deed into the borrower” without informing the client that the title has not been examined. Title examinations are the practice of law in South Carolina, and  title companies do not have the power to permit a lawyer to shorten search periods without the informed consent of the attorney’s client.
  • Relying on prior title insurance policies that are not worthy of reliance. In “tacking on” to prior policies, closing attorneys should use common sense and good judgment. Determine who issued the prior policy and decide whether that person’s work should be substituted for your own. Review the prior policy to determine whether it looks normal on its face. Some title insurance companies are issuing products that are not backed by title examinations or are backed by very short title examinations. Those policies are not worthy of reliance in an atmosphere where title examinations are the practice of law. As in the case of other short searches, informed consent confirmed in writing from clients should be obtained for employing a short search based on a prior policy.
  • Failing to pull back title notes where a short search is used. It does not help that the attorney’s office has closed properties in the same chain of title if that prior title work is not used. Exceptions and requirements from the prior title work should be used in the current title insurance commitment and policy.
  • Failing to search for a longer period of time where the shorter search does not reveal normal easements and restrictions for the type of property being searched. A search involving a residential subdivision created in the 1950’s should not stop in the 1960’s.

At least two sets of eyes should review every title examination. And one of those sets of eyes should belong to an attorney who was taught in law school to spot issues!

IRS issues for tax season…for your reading pleasure

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Just in time for tax season, the IRS announced on April 4 that it will begin using private debt collectors pursuant to federal law enacted late in 2015.

The IRS said that it will begin this month sending around 100 letters per week to taxpayers who have accumulated years-overdue tax debt. If the process goes smoothly, the number of letters will be increased to 1,000 per week.

Outsourcing debt collection will likely provide scammers with new opportunities, so the IRS has provided some advice for the safety of taxpayers.

The taxpayer will hear from the IRS first by letter. The letter will provide the name and contact information for the debt collection firm. After that initial contact, the debt collection firm will send its first letter confirming that it will handle the case. Neither initial contacts will be by telephone.

At this point, only four firms have been identified:  CBE Group of Cedar Falls, Iowa; Conserve of Fairport, New York; Performant of Livermore, California; and Pioneer of Horseheads, New York. Each taxpayer’s account will be assigned to only one of these firms.

None of the firms will ever ask for payments to be made to anyone other than the United States Treasury. If a taxpayer is asked to make payment to anyone else, this is a scam.

In the case of mistreatment under this new program, taxpayers are urged to file complaints with the Treasury Inspector General for Tax Administration and the Consumer Financial Protection Bureau.  The IRS and Congress have indicated they will be monitoring this situation carefully.

On a related topic, real estate lawyers should be reminded that the IRS may issue a levy, which is a legal seizure, of a taxpayer’s property to satisfy a tax debt. When a levy is issued, it applies to real property, money, credits and bank deposits. A levy can also reach property held by third parties, such as retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivable, the cash loan value of life insurance policies and commissions.

The IRS issues a levy only after it has exhausted other means to collect a tax debt.

From time to time, a settlement agent will receive a levy for a party involved in a closing. The taxpayer should be sent a notice in writing of the receipt of the levy and should be directed to consult with his or her tax advisor. Remember that a real estate lawyer who is not also competent as a tax lawyer should never offer tax advice. Typically, after the taxpayer has time to seek tax advice, the settlement agent should comply with the levy.

(If I received a levy, however, I would also seek my own tax advice prior to disbursing any funds!)

The Carolinas are basketball states!

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(And states dealing with a “clarified” boundary)

Congratulations to the University of North Carolina on last night’s win in the Men’s College Basketball National Championship!  North Carolina has always been a basketball state, and our hats are off to you!  Our Gamecocks made it to the Final Four for the first time ever, so both states are proud of their men’s basketball teams!  And congratulations to our Gamecock women who won their National Championship on Sunday!  We love seeing that flag fly over our statehouse! Both Carolinas are apparently now basketball states!

We are also states with a newly defined boundary line between us. The long awaited and much debated legislation “clarifying the original location the boundary” became effective on January 1, 2017, and both states are dealing with the ramifications of the legislation.

Some parcels previously believed to be in South Carolina are now confirmed to be in North Carolina and vice versa. Both legislatures insist that the boundary has not changed, but that since markers have been lost or destroyed by the elements, it was necessary to have the boundary researched and resurveyed. (If they had taken the position that the boundary line was being moved, they would have had to involve Congress.)

South Carolina real estate lawyers have been advised to consult with their title insurance companies for guidance as they deal with affected properties. In North Carolina, however, the Real Property Section of the Bar and the Land Title Association have issued a lengthy memorandum, dated March 20, 2017, to provide guidance to North Carolina lawyers. I thought this memorandum might be useful to point out the various issues to South Carolina lawyers and link it here.

The best advice I can give all of us dealing with issues surrounding this change is to proceed slowly and with due diligence, consulting your title insurance company underwriters every step of the way!