ADVISORY LETTER FROM WYOMING ASSOCIATION OF REALTORS® COUNCIL
SUBJECT: Unauthorized Practice of Law
Disclaimer: The information contained in this Advisory Letter is for use of members of the Wyoming Association of Realtors® . The application and impact of opinions and guidance set forth can vary widely based on the specific facts involved. While Wyoming Association of Realtors® have made very attempt to ensure that the information contained in this letter is accurate, Wyoming Association of Realtors® is not responsible for any errors or omissions and any individual member shall be advised to consult their legal counsel.
Issue: Recent Supreme Court Ruling – Unauthorized Practice of Law.
The Wyoming Supreme Court has recently approved a Consent Agreement in the matter of The Unauthorized Practice of Law Committee, Wyoming State Bar v. Razor City Realty, D-17-0001. The matter came before the Court upon a Report and Recommendation for Approval of Consent Agreement based upon a violation of the Rules of Procedure Governing Unauthorized Practice of Law. The issues that arose out of a transaction were the significant modifications made to the WAR Form and sale of business assets (non-real property). The case can be viewed at http://www.courts.state.wy.us/Documents/Opinions/2017WY37.pdf.
Wyoming Supreme Court’s Rules Governing the Wyoming State Bar and the Authorized Practice of Law provide, in relevant part:
Rule 7. Authorization to practice law.
The following persons are authorized to practice law in Wyoming:
Members of the Wyoming State Bar, as more fully delineated and subject to the limitations set forth in the Bylaws of the Wyoming State Bar;
Attorneys who have been granted pro hac vice admission as provided in Rule 8, subject to the limitations set forth in that rule;
Law school clinic supervising attorneys meeting the qualifications of Rule 9, subject to the limitations set forth in that rule;
Law students meeting the qualification of Rule 9, subject to the limitations set forth in that rule; and
Attorneys meeting the qualification of Rule 5.5(d) of the Wyoming Rules of Professional Conduct, subject to the limitations set forth in that rule.
“Practice law” means providing any legal service for any other person, firm or corporation, with or without compensation, or providing professional legal advice or services where there is a client relationship of trust or reliance, including appearing as an advocate in a representative capacity; drafting pleadings or other documents; or performing any act in a representative capacity in connection with a prospective or pending proceeding before any tribunal.
Whether or not they constitute the practice of law, the following are not prohibited:
(3) Statutorily authorized acts by a real estate agent or broker licensed by the Wyoming Real Estate Commission.
In Razor City, the agent sold business assets of a computer business. In entering into the agreement, the agent used the Contract to Buy and Sell Real Estate (Commercial) to set the terms of the agreement between Buyer and Seller. Due to the use of a form which purpose is for the sale of commercial real property for the sale of non-real property business assets, many sections were marked out and not applicable. The Committee for the Unauthorized Practice of Law (UPL) deemed the significant changes to the attorney-approved WAR form to be significant and the practice of law.
As a practical matter, many transactions require the blacking out of portions of the WAR forms. In a cash only transaction, the loan terms section of the WAR form is not applicable. In speaking to Bar Counsel regarding this case, such a black out, is not practicing law. However, any modifications of the form which changes the general intent of the form will be deemed the Unauthorized Practice of Law.
Brokers and agents should be very careful in making any modifications or additions to the WAR forms. The line between the practice of law has not been established but an agent or Broker should have any significant modifications be reviewed by counsel. In addition, any additions to the WAR forms should be reviewed by counsel or part of attorney approved clauses.
The large issue in Razor City was the sale of non-real property. The Supreme Court stated “the purchase and sale of Your Computer Store, LLC did not involve the purchase and sale of any real property, commercial or otherwise.” Under Rule 7(c)(3) of the UPL, an agent or Broker is not practicing law if they are completing authorized acts. The Wyoming Statutes set forth that a Real estate transaction means “any real estate activity.”
Any Real Estate Activity means:
“Real estate activity” occurs when an individual for another and for compensation performs any one or more of the following:
(A) Sells, exchanges, purchases, rents, manages or leases real estate;
(B) Offers to sell, exchange, purchase, rent, manage or lease real estate;
(C) Negotiates, offers, attempts or agrees to negotiate the sale, exchange, purchase, rental or leasing of real estate;
(D) Lists, offers, attempts or agrees to list real estate for sale, lease or exchange;
(E) Auctions, offers, attempts or agrees to auction real estate;
(F) Collects, offers, attempts or agrees to collect rent for the use of real estate;
(G) Advertises or holds himself out as being engaged in the business of buying, selling, exchanging, auctioning, renting or leasing real estate;
(H) Engages in the business of charging an advance fee in connection with any contract undertaken to promote the sale, auction or lease of real estate either through its listing in a publication issued for that purpose or for referral of information concerning the real estate to brokers;
(J) Buys, sells, offers to buy or sell or otherwise deals in options on real estate or improvements thereon;
(K) Assists or directs in the procuring of prospects calculated to result in the sale, exchange, lease or rental of real estate;
(M) Assists or directs in the negotiation of any transaction calculated or intended to result in the sale, exchange, lease or rental of real estate;
(N) Deals in time shares;
(O) Provides a broker's price opinion as provided in W.S. 33-28-125.
W.S. 33-28-102 (xiv)
As you can see, the transactions and activity refer to real estate. “Real Estate: means leaseholds, as well any other interest or estate in land, whether corporeal, incorporeal, freehold or nonfreehold, and whether the real estate is situated in this state or elsewhere but shall not apply to nor include mineral lands, rights or leases.” The sale of business assets or any non-real estate assets is not a real estate transaction and therefore not exempt for a violation of the UPL.
Therefore, if a member is selling non-real estate assets, he or she should not provide any professional legal advice or services or draft any documents associated with the transfer, lease, sale, exchange or auction of non-real estate. If a member is involved in non-real estate transactions, they need to ensure the parties use legal counsel to draft and complete the transactions.
As the line between practicing law with regard to modifications and additions to WAR forms is not completely clear, the line between a real estate transaction and non-real estate transaction can also be blurry. For example, most real estate transactions include the sale of assets such as lawn mowers, propane tanks, extra refrigerators, etc. In addition, many members sell mobile homes which may not been deemed real property. The sale of such mobile homes would not be covered as a real estate transaction and therefore potentially not included under the exemption of Rule 7(c)(3).
The Executive Committee is aware of both issues raised above and will be working on potential changes, removal and addition of WAR forms as well as working with the State Legislature to amend the Statutes. In the meantime, please consult with your counsel if you believe one of these issues could be deemed the unauthorized practice of law.
As Bar Counsel stated, this was the first case of UPL by an agent and Broker. The UPL Committee is not seeking these cases and understands that the line is blurry in most situations. However, the Razor City case should be reviewed and the daily transaction of the members should consider the findings and rulings of the case.
IF YOU HAVE ANY FURTHER QUESTIONS – PLEASE CONSULT WITH YOUR LEGAL PROFESSIONALS.