Position Statement To The American Bar Association Commission On Multijurisdictional Practice
June 2001
American College of Real Estate Lawyers
Position Statement to the American Bar Association
Commission on Multijurisdictional Practice
June 2001
This position statement is presented to the ABA Commission on Multijurisdictional Practice (the "Commission") by the American College of Real Estate Lawyers ("ACREL" or the "College") for the purpose of strongly advocating that the Commission recommend that the ABA actively promote changes to existing statutes and rules addressing the unauthorized practice of law ("UPL") in order to render them compatible with the realities of today's interstate practice of transactional real estate law.
ACREL was founded in 1978 and has grown from its 125 charter members to a current membership of 835 prominent real estate lawyers practicing in all 50 states and several foreign countries. The College was organized to afford lawyers distinguished for their skill, expertise and high standards of professional and ethical conduct in the practice of real estate law an opportunity to gather together and address issues of common interest and importance to real estate practitioners. Membership in the College is by invitation, based not only on a candidate's accomplishments as a practitioner but also on his or her commitment to the improvement of real estate law and practice through teaching, writing, bar related activities, the promotion of legislation, or other public service. ACREL members are recognized as both able practitioners and serious students of real estate law. They are expected to contribute actively to the fulfillment of the College's objectives, among which are to: (i) promote high standards of professional and ethical responsibility in the practice of real estate law, (ii) address issues of importance to real estate law by participation in law reform matters and legislative, administrative and judicial initiatives where appropriate, and (iii) cooperate and consult with national, state and local bar organizations, government agencies and other groups that have an interest in real estate law and practice.
The members of ACREL believe that the issues currently being addressed by the Commission are of fundamental importance to their practices and that, in light of the objectives of the College, it is essential that ACREL present to the Commission the views of its membership on the matters being considered. ACREL very much appreciates the opportunity to share with the Commission the perspective of its members and sincerely hopes that its comments will assist the Commission in shaping a workable approach to the complex and sensitive issues it is confronting.
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The Board of Governors of ACREL appointed a working group of College members to study the subject of multijurisdictional practice ("MJP"), to evaluate the impact of existing UPL statutes and rules on the practice of real estate law, and to propose to the Board a position statement for ACREL to adopt and promote. (1) Before presenting its conclusions to the Board, the working group received substantive input from a cross section of the College's membership. The efforts of the working group resulted in the development of this statement which the Board has approved on behalf of the membership of the College and has directed be submitted to the Commission. (2)
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While the successful practices of many real estate lawyers have not required their crossing state lines, a significant number of College members and other real estate practitioners today regularly find themselves engaged in transactions that involve properties and parties located outside of the states in which they have been licensed to practice. They frequently negotiate with lawyers in other states, in person, by phone and electronically, often dealing with multiple parties in multiple states. Real estate lawyers commonly create, utilize and are retained by entities organized under the laws of other states and draft and negotiate documents that expressly provide that the laws of other jurisdictions will govern their enforcement.
Our clients routinely seek our counsel whether the properties they intend to buy, sell, develop, construct, manage, lease or finance are located in their home state, right across the state line or on the other side of the country. Many of our clients own or operate businesses that are international, national or regional in scope -- companies that develop, construct or manage shopping centers, office buildings or residential projects around the country; retail businesses that lease store space in commercial developments throughout the U.S.; banks, insurance companies and other institutional lenders that finance the development and purchase of real property for their customers wherever it may be located; and entrepreneurs, REITs, investment advisors and pension funds that invest in and sell all manner of real estate, regardless of location. In-house real estate counsel commonly provide services for clients that engage in businesses dependent on cross border transactions, advising their local, regional, national or international clients on matters related to projects and issues that extend beyond the boundaries of their home states. In addition, the fact that certain real estate lawyers are nationally recognized experts in discrete areas of the law leads to their engagement for matters all over the country. Consequently, any suggestion that the practice of real estate law in the current business environment is primarily "local" in nature ignores the realities of today's national real estate marketplace and the intricacies of the practice of many of today's real estate lawyers.
Many clients work very closely with their counsel and forge strong personal relationships with them. Real estate clients commonly consider their transactional lawyers integral parts of their business teams, frequently calling upon them to help develop and achieve their strategic objectives. Most clients justifiably oppose any efforts by third parties to dictate their selection of counsel, regardless of reason. Any attempt to force these experienced users of legal services unnecessarily to retain local counsel they do not know or do not know well simply because such lawyers happen to be licensed in another state would be met with strong resistance. Furthermore, the additional transactional costs generated by requiring lead counsel to engage local counsel at every stage of a transaction involving parties, property, or the law of another state are not tolerated in the increasingly cost-sensitive legal marketplace and hinder a client's ability to compete efficiently.
There is no reason to believe that lawyers hold themselves out as having been admitted in jurisdictions where they are not licensed, and clients understand that when their regular real estate counsel practice outside of their home states and have a legitimate need for input or advice on matters of local law and practice, they will obtain it. Correspondingly, the real estate practitioner is keenly aware that in some matters local issues, whether state, city or county, will be of fundamental importance. It is for this reason, among others, that lawyers must adhere to the requirements of Model Rule 1.1, which imposes on counsel the duty to provide competent representation to a client, and require the lawyer to have and exercise the legal knowledge, skill, thoroughness and preparation reasonably necessary for each engagement. Real estate lawyers must recognize the obligation to gain whatever knowledge of local law a representation demands (whether by research, or consultation with or engagement of competent local counsel), a responsibility that differs little from that which requires them to conduct research or seek advice from colleagues in their own or different firms in the many instances when they are confronted with matters requiring knowledge of areas of the law that may be outside their own expertise, such as tax, securities, bankruptcy or environmental law.
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The state laws and rules governing UPL were enacted in an era that did not contemplate the nationalization (or indeed globalization) of legal practice and the fact that lawyers in most legal disciplines often participate in transactions that in one way or another cross state borders into jurisdictions where they are not licensed. These arcane state laws and rules are not only widely inconsistent from state to state, but fail to articulate clearly what an out-of-state lawyer may or may not do. While at least some of the impediments to cross-border litigation practice have been ameliorated by the rules of pro hac vice, no similar accommodation has been made for transactional lawyers confronted with comparable restrictions on their practices. Even though the UPL statutes are seldom enforced and commercial lawyers regularly practice across state lines without substantial concern of disciplinary action, several recent cases have highlighted the risk of selective enforcement of UPL statutes and the need to revise an antiquated statutory scheme. And whether or not enforced, as a policy matter it is unwise to retain rules that are acknowledged to be inconsistent with current practice realities and needs.
While ACREL appreciates, and indeed supports, the desire of individual states to protect their residents from exposure to lawyers that do not possess the requisite level of competence, the College believes that a rational and workable system can be developed that will protect these legitimate state interests while permitting the cross-border practice necessary in today's business and legal environment. Accordingly, ACREL recommends that the Commission strongly advocate that the ABA actively promote changes to the existing UPL statutes and other rules governing the profession in order to render them compatible with the realities of today's interstate practice of transactional law. Simply put, transactional lawyers admitted and in good standing in one state (a "home state") must be permitted to represent clients in a state in which they are not admitted (a "host state") so long as (a) their clients have been advised that the lawyer is not admitted to practice in the host state; (b) the lawyer's presence in the host state is not permanent; (c) the lawyer is acting with respect to a matter that arises out of, or is reasonably related to, the lawyer's practice in his or her home state, and whether or not the client is located in or the matter is related to the home state; and (d) the lawyer is prepared to submit to the ethical and disciplinary authority of the host state with respect to matters relating to such representation, including the repercussions of any violation of state competency and ethical standards.
Specifically, the College:
1. Endorses the changes to Model Rule of Professional Conduct 5.5 proposed by the Ethics 2000 Commission, subject to the comments noted below;
2. Proposes that Model Rule 5.5 be modified to permit a lawyer in good standing in his or her state of admission to practice outside the home state so long as (a) the lawyer is not permanently based in the host state, (b) the lawyer advises the client that the lawyer is not admitted to practice in the host state, and (c) the lawyer is acting with respect to a matter that arises out of, or is reasonably related to, the lawyer's practice in his or her home state;
3. Proposes a revision of Model Rule 5.5 to permit a lawyer admitted to practice and in good standing in a home state to perform services in the host state that would not constitute UPL if performed by a non-lawyer in the host state;
4. Supports the extension of Rule 5.5 to permit in-house counsel to provide legal services (other than before a tribunal) in a host state to their employers, affiliates of their employers and other employees of their employers and their affiliates in connection with the business of such entities;
5. Supports the extension of Rule 8.5 to permit a host state to expand its disciplinary enforcement jurisdiction over a lawyer not admitted in the host state with respect to legal services rendered or offered to be rendered in the host state; and
6. Urges the Commission to recommend that the ABA aggressively pursue the adoption of such state or federal legislation and rule changes as is necessary to implement the foregoing.
Respectfully submitted,
AMERICAN COLLEGE OF REAL ESTATE LAWYERS
Caryl B. Welborn
President, ACREL
Mark F. Mehlman
Chair, MJP Working Group
Endnotes:
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1 While a number of ACREL members may from time to time litigate or arbitrate real estate related matters, we are not in this Statement attempting to address the practical problems UPL laws create for litigators, recognizing that the Commission has received direct input from other groups and organizations better able to articulate these concerns.
2 The ACREL working group had access to the submissions made to the Commission by many other groups and benefited substantially from the thoughtful work of various Sections of the ABA and other groups that have responded to the Commission. Not surprisingly, the recommendations of ACREL set forth herein closely parallel those of a number of these ABA Sections and other groups.