Window to the Law: Avoiding Unlicensed Practice of Law

Window to the Law: Avoiding Unlicensed Practice of Law

Feb 28, 2018
Light Theme Light Dark Theme Dark


Learn important risk management strategies to help real estate licensees avoid the unlicensed practice of law. 

Download Slide Presentation (PDF: 227.81 KB)

Window to the Law: Avoiding Unlicensed Practice of Law: Transcript 

Article 13 of NAR’s Code of Ethics prohibits the unauthorized practice of law and requires members to recommend legal counsel when the interests of any party to the transaction require it. But the unauthorized practice of law isn’t just a Code of Ethics issue - state laws also prohibit the unauthorized practice of law. 

The policy reasons behind this prohibition are clear. In order to practice law, an individual must graduate from law school, pass the state bar exam, and obtain a license to practice law from the state.  These stringent requirements ensure that only people with the sufficient knowledge and skills may represent the public in legal matters. Real estate licensees that engage in the unauthorized practice of law may face substantial fines or revocation or even suspension of their real estate license.

So how can you avoid the unauthorized practice of law? 
First, know what the unauthorized practice of law means in your state. Definitions vary from state to state depending on statutes, rules and regulations, as well as court decisions. Some states even have specific statutes governing what actions real estate agents may undertake during transactions. Be sure familiarize with yourself with your state’s specific rules and regulations, but generally speaking, most states prevent non-lawyers from preparing legal instruments and providing legal advice.  
Most real estate professionals use forms agreements in their day-to-day business, including purchase agreement forms. Because real estate laws vary significantly from state to state, the forms are state specific. Do not draft your own forms. Instead, use the forms provided by your state and local associations.  Most associations provide these forms as a membership benefit, so be sure to take advantage of this service. 
Depending on your state, even minor modifications to a form agreement may constitute the unauthorized practice of law. For example, courts in New York have held that real estate professionals may not modify a real estate sales agreement in any way that requires the exercise of legal expertise, while Ohio case law allows real estate professionals to complete the “blanks” of a form purchase or lease contract but prohibits the drafting of lengthy contingencies or addendums. Real estate professionals should stick to only filling in non-legal, factual provisions of the agreement, such as names, dates, location, and party descriptions. If your client is asking for an addendum or contingency, refer them to their attorney to draft appropriate language. In some cases, a broker may have legal counsel draft frequently requested clauses or provisions, and make the form language available to their agents. 
Keep in mind that striking provisions from a form agreement may also constitute the unauthorized practice of law. A 2017 case from Wyoming focused on such an allegation against a real estate professional. In the Wyoming case, a computer store hired a real estate company to broker the sale of the computer store’s assets to a third party. The agent handling the transaction used the state association’s forms but removed those sections pertaining to the sale of real estate. Wyoming’s Committee for the Unauthorized Practice of Law found the changes were significant enough to constitute the unauthorized practice of law, and the court approved and adopted the committee’s report.  

Numerous states have found that preparing legal documents for a fee constitutes the unauthorized practice of law, so real estate professionals should not charge a fee for preparing documents in a real estate transaction.  For example, a 1955 case in Michigan held that it is permissible for real estate professionals to fill out forms if doing so was merely incidental to the real estate transaction and a separate fee was not charged. 
As transactions become more complex, purchasers and buyers often ask their trusted real estate professional to interpret contract provisions or provide other legal advice, for example, if a dispute arises. Don’t oblige your clients because doing so will likely constitute the unauthorized practice of law in your state. Instead, comply with your obligations under the Code of Ethics and encourage your client to consult an attorney. 
These risk management strategies will help you avoid the unauthorized practice of law. 
Thanks for watching this month’s episode of Window to the Law. 

Learn More

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.
Window to the Law is a monthly video series that provides valuable risk management tips and information to help real estate professionals navigate legal issues facing the real estate industry.
From the advocacy efforts to technology advances and updates on commercial industry trends, the topics in this series all relate to what’s happening in commercial real estate now and what trends are on the horizon.
These webinars and videos are an extension of the New AE Orientation, intended to provide ongoing learning on association management resources and programs to newly appointed AEs.
NAR’s new video series elevating the conversation around the issues relevant to you and what you do. Hear how your peers are putting real estate programs into practice and making an impact in their communities and businesses.
The hunt is about so much more than the house. Home buying hiccups lead to tough decisions. Guided by the expertise of a REALTOR®, First-Time Buyer puts the real in real estate.
YouTube Play Button Icon

NAR Videos on YouTube

NAR offers additional topics online covering legislation, events, industry news and guides for both NAR members and the public. Visit NAR on YouTube

National Association of REALTORS®

25.6K subscribers

Open YouTube


1.82K subscribers

Open YouTube

REALTOR® Magazine

3.96K subscribers

Open YouTube

NAR Meetings

1.85K subscribers

Open YouTube

Realtors Property Resource® (RPR)

13.4K subscribers

Open YouTube


1.46K subscribers

Open YouTube

First-Time Buyer

3.7K subscribers

Open YouTube

That’s Who We R (playlist)

Open YouTube