R.I. Supreme Court rules title insurance companies can do real estate closings

PROVIDENCE — While emphasizing the value of homebuyers having a lawyer at their side during a real-estate closing, the state Supreme Court left the door open for title insurance companies and their agents to continue the longstanding practice in Rhode Island of conducting closings, but with some limitations.

The state Supreme Court in December heard arguments in a packed courtroom about what duties in a real estate closing may be performed by non-lawyers. The controversy arose from complaints fielded by the state Supreme Court Unauthorized Practice of Law Committee. In each, the committee determined that the parties had engaged in the unauthorized practice of law and recommended the high court find that conducting a real-estate transaction should be the exclusive domain of lawyers to best protect the public.

The high court on Friday ruled that title insurance companies and their agents may continue to conduct closings in accordance with state law, as long as they limit their activities to duties such as identifying a document, indicating where to sign and delivering signed documents.

Recognizing that widening the market to non-lawyers lowers costs and increases competition, the court held that title insurance companies and their agents may draft a residency affidavit and a limited durable power of attorney in connection with issuing title insurance to buyers.

The court, however, concluded that a title insurance company may conduct an examination of title for marketability only if a licensed attorney undertakes the examination to best protect the interests of buyers.

The court found, too, that drafting a deed constitutes the practice of law, meaning that a lawyer must either draft the deed or review it after it has been prepared.

“We reiterate that we do not express today that the parties to a real estate transaction are better off proceeding without counsel. Indeed, the best and most prudent practice would be to retain counsel for guidance at every step of the transaction. However, based on the limited record before us and the lack of evidence indicating that the public has been harmed, title insurance companies and their agents should be permitted to conduct closings when they are issuing title insurance and when they otherwise act in accordance with” the Rhode Island Title Insurers Act, the unanimous court wrote.

The court specified that to ensure transparency non-lawyer closing agents must communicate to the parties that they are not licensed to practice law; do not represent either the buyer or seller; and cannot give legal advice. Closings should be suspended if legal questions arise so a lawyer can weigh in, the court said.

The complaints at issue involved William Paplauskas, Jr.; Daniel S. Balkun, owner of Balkun Title & Closing Inc.; and SouthCoast Title and Escrow.

One targeted Balkun and the Warwick company he founded in 2016. According to the committee, Balkun’s deposits in the first half of 2018 averaged $10.4 million a month.

A former correctional officer at the state Department of Corrections, Balkun was indicted in 1997 and later pleaded guilty to money laundering and aiding and abetting in a sports gambling scheme in Las Vegas. He was sentenced to serve 46 months.

In 2016, he applied for a title insurance agent’s license with the Rhode Island Department of Business Regulation. He responded yes when asked if he had ever been convicted of a felony, but the department never followed up and granted the license Feb. 25, 2016, the committee wrote in its report.

The department renewed the license in September 2017, but initiated a process to evaluate his felony conviction. It has since imposed conditions on Balkun’s license, including that he hire certified public accountants to review his company’s financial records on a quarterly basis for two years and bi-annually for two more years.

The committee determined, and the court agreed, that Balkun Title had engaged in the unauthorized practice of law by preparing deeds, residency affidavits and powers of attorney for sellers of a Johnston property.

The court disagreed with the committee’s finding that SouthCoast Title and Escrow Inc., a Cranston title insurer owned by lawyer Anthony Senerchia and his wife, Karen, and Raymond Morris, engaged in the unauthorized practice of law by providing certain real-estate services in Rhode Island.

Similarly, the court found that Paplauskas was acting within his right under state law when he conducted closings.

Justice Maureen McKenna Goldberg recused herself from hearing the case.

kmulvane@providencejournal.com

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