North Carolina Closing Process –
Who, What, When, Where, How and Why?
Below is a very simple chart, followed by relevant statutes regarding NC legal requirements for closing real estate
transactions and issuance of title insurance coverage. These are in addition to anything required by federal law or RESPA.
Actions marked with an asterisk “*” which are the practice of law are subject to the criminal liability and disallowance of
fees charged under N.C.G.S. 84-8 and civil penalties under N.C.G.S. 84-10.1.
Action
Who & How
Legal Cites (N.C.G.S. means North Carolina General Statutes)
Preparation or aiding in the
preparation of deeds,
mortgages, legal docs *
1. NC licensed attorney, not an employee of a company (other than of a law firm), or legal
assistant under their direct supervision,.
2. Actual party (lender, borrower, not a paid representative or non-attorney employee)
N.C.G.S. 84-2.1; N.C.G.S. 84-5; State v. Pledger
Preparer’s name must be shown on face of the deed or deed of trust.
N.C.G.S. 47-17.1
Abstracting or passing upon
titles *
NC licensed attorney, or legal assistant under their direct supervision, not a company
employee (other than of a law firm)
N.C.G.S. 84-2.1
Title certification for title
insurance *
NC licensed attorney on title insurer’s approved attorney list (though may use report of
legal assistant under their direct supervision) – NOT EMPLOYED BY, AN OWNER OF OR
AFFILIATED OR UNDER CONTRACT WITH THE TITLE INSURANCE COMPANY OR
AGENT
N.C.G.S. 58-26-1(a); N.C.G.S. 84-2.1
http://www.northcarolina.ctt.com --> Legal --> Bulls Bulletins Articles & Forms -->
Attorneys & Closings
Title update and certification at
time of recording *
NC licensed attorney on title insurer’s approved attorney list (though may use report of
legal assistant under their direct supervision) – NOT EMPLOYED BY, AN OWNER OF OR
AFFILIATED OR UNDER CONTRACT WITH THE TITLE INSURANCE COMPANY OR
AGENT
N.C.G.S. 58-26-1(a); N.C.G.S. 84-2.1
http://www.northcarolina.ctt.com --> Legal --> Bulls Bulletins Articles & Forms -->
Attorneys & Closings

Attorney closing is standard in North Carolina. However, a nonlawyer can do these 3 very
limited functions (so long as providing no explanation or advice regarding nature or terms
of documents being signed).


Present and identify the
documents,
Direct the parties where
to sign the documents,
and
Ensure that the parties
have properly executed
the documents,
without answering
questions, explanation or
analysis
CAUTION: This is not the normal procedure in NC and the buyer/borrower’s lack of
representation is risky to anyone involved. So it is highly discouraged and should be
accompanied with significant, clear disclosures to consumer about scope of
representation (or lack thereof) and risks to them of failure to retain attorney instead as
well as written waivers. The transaction must be effectively controlled by or under the
direct supervision of an independent NC licensed attorney, not the non-lawyer.
“Coordination” or “handling” by a non-lawyer otherwise may be interpreted that the nonlawyer is, in effect, controlling the transaction and thereby rendering legal representation
and advice – the unauthorized practice of law.
No representation of saving money using nonlawyer should be made as this is highly
unlikely to be true and may be a clear misrepresentation.
North Carolina Closing Process – Last Rev. 2-24-12
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No closing protection coverage is available to a nonattorney other than the actual
agent/agency of the title insurance underwriter.
Authorized Practice Advisory Opinion 2002-1, January 24, 2003, revised January 26, 2012
http://www.ncbar.com/ethics/ethics.asp?page=493
N.C.G.S. 58-26-1
See large number of cases decided by the North Carolina State Bar Authorized Practice
Committee
Receive and disburse the
closing funds only (based on
parties’ drafting & agreement on
HUD-1 or comparable closing
statement, and only after update
of title and recording of closing
documents)
Attorney closing is standard in North Carolina. A nonlawyer may receive and disburse
funds, but only after all legal documents are prepared by a NC attorney (or a party to the
transaction) and after an attorney has updated title and recorded documents.
Any funds held and disbursed as part of a residential closing on North Carolina real estate
must be held in an account qualifying for interest on trust or escrow accounts and must be
reported to the North Carolina State Bar. N.C.G.S. 45A-9
Good Funds Settlement Act, N.C.G.S. Chapter 45A
Authorized Practice Advisory Opinion 2002-1,
http://www.ncbar.com/ethics/ethics.asp?page=493
Residential: Illegal to disburse prior to attorney’s update of title and recordation of closing
documents. N.C.G.S. 45A-4.
Underwriting & issuing title
insurance commitments or
policies
Issued only by NC licensed title insurance underwriter
Underwriter Lookup  https://sbs-nc.naic.org/LionWeb/jsp/sbsreports/CompanySearchLookup.jsp
OR licensed appointed agent,
Agent Lookup  https://sbs-nc.naic.org/Lion-Web/jsp/sbsreports/AgentLookup.jsp
as reflected on the NCDOI records.
REQUIRES the opinion of an attorney, licensed to practice law in North Carolina and not
an employee or agent of the company, who has conducted or caused to be conducted under
the attorney's direct supervision a reasonable examination of the title. N.C.G.S. 58-26-1(a)
Advise or give opinion upon the
legal documents, rights of
person, etc.*
NC licensed attorney only (not an employee of title insurer or company other than law
firm, even if an attorney)
N.C.G.S. 84-2.1; N.C.G.S. 84-5
Closing Protection Coverage
Issued by title insurance underwriter but only for:
(1) NC Licensed attorney on their approved attorney list, not an employee of the title
insurer or agent or a company other than a law firm OR
(2) Individual with active NC agency license, duly appointed as NC representative of a
title insurance company licensed in NC with NC Dept of Insurance (after compliance
with examination and registration requirements)
Form and rate must comply with NC Title Insurance Rating Bureau filing with the NC
Department of Insurance.
NO BLANKET LETTERS – specific attorney, lender and borrower/buyer must be
identified in each letter.
N.C.G.S. 58-26-1
http://www.northcarolina.ctt.com --> Legal --> Bulls Bulletins Articles & Forms -->
Attorneys & Closings
North Carolina Closing Process – Last Rev. 2-24-12
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APPLICABLE TITLE INSURANCE STATUTES
N.C.G.S. § 58-26-1. Purpose of organization; formation; insuring closing services; premium rates; combined
premiums for lenders' coverages
(a) Companies may be formed in the manner provided in this Article for the purpose of furnishing information in relation to
titles to real estate and of insuring owners and others interested therein against loss by reason of encumbrances and defective
title; provided, however, that no such information shall be so furnished nor shall such insurance be so issued as to North
Carolina real property unless and until the title insurance company has obtained the opinion of an attorney, licensed to
practice law in North Carolina and not an employee or agent of the company, who has conducted or caused to be conducted
under the attorney's direct supervision a reasonable examination of the title. The company shall cause to be made a
determination of insurability of title in accordance with sound underwriting practices for title insurance companies. A
company may also insure the proper performance of services necessary to conduct a real estate closing performed by an
approved attorney licensed to practice in North Carolina. Provided, however, nothing in this section shall be construed to
prohibit or preclude a title insurance company from insuring proper performance by its issuing agents.
(b) Repealed by Session Laws 2002-187, s. 7.1.
(b1) Domestic and foreign title insurance companies are subject to the same capital, surplus, and investment requirements
that govern the formation and operation of domestic stock casualty companies. Domestic title insurance companies are
subject to the same deposit requirements that govern the operation of other domestic casualty companies in this State.
Foreign or alien title insurance companies are subject to an initial deposit pursuant to G.S. 58-26-31(b), based on the
forecasted statutory premium reserve and the supplemental reserve for the first full year of operation in this State, but not less
than two hundred thousand dollars ($ 200,000).
(c) This Article shall not be interpreted so as to imply the repeal or amendment of any of the provisions of Chapter 84 of the
General Statutes of North Carolina nor of any other provisions of common law or statutory law governing the practice of law.
(d) The premium rates charged for insuring against loss by reason of encumbrances and defective title and for insuring real
estate closing services shall be based on the purchase price of the real estate being conveyed or the loan amount and shall not
be established as flat fees. If a title insurer has also issued title insurance protecting a lender or owner against loss by reason
of encumbrances and defective title, the insurer shall charge one undivided premium for the combination of the title insurance
and the closing services insurance.
(e) If the premium stated upon a policy of title insurance has been understated or overstated due to inadvertence, mistake, or
miscalculation of the closing attorney or his employees, and the incident is not purposeful or part of a pattern, the
Commissioner of Insurance shall not be required to impose a civil penalty or other sanction for the inadvertence, mistake, or
miscalculation.
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North Carolina Closing Process – Last Rev. 2-24-12
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APPLICABLE PRACTICE OF LAW STATUTES & AUTHORIZED PRACTICE OPINION
§ 84-2.1. "Practice law" defined
The phrase “practice law” as used in this Chapter is defined to be performing any legal service for any other
person, firm or corporation, with or without compensation, specifically including the preparation or aiding in the
preparation of deeds, mortgages, wills, trust instruments, inventories, accounts or reports of guardians, trustees,
administrators or executors, or preparing or aiding in the preparation of any petitions or orders in any probate or
court proceeding; abstracting or passing upon titles, the preparation and filing of petitions for use in any court,
including administrative tribunals and other judicial or quasi-judicial bodies, or assisting by advice, counsel, or
otherwise in any legal work; and to advise or give opinion upon the legal rights of any person, firm or corporation:
Provided, that the above reference to particular acts which are specifically included within the definition of the
phrase “practice law” shall not be construed to limit the foregoing general definition of the term, but shall be
construed to include the foregoing particular acts, as well as all other acts within the general definition. The
phrase “practice law” does not encompass the writing of memoranda of understanding or other mediation
summaries by mediators at community mediation centers authorized by G.S. 7A-38.5 or by mediators of
personnel matters for The University of North Carolina or a constituent institution.
§ 84-4. Persons other than members of State Bar prohibited from practicing law
Except as otherwise permitted by law, it shall be unlawful for any person or association of persons, except active members of
the Bar of the State of North Carolina admitted and licensed to practice as attorneys-at-law, to appear as attorney or counselor
at law in any action or proceeding before any judicial body, including the North Carolina Industrial Commission, or the
Utilities Commission; to maintain, conduct, or defend the same, except in his own behalf as a party thereto; or, by word, sign,
letter, or advertisement, to hold out himself, or themselves, as competent or qualified to give legal advice or counsel, or to
prepare legal documents, or as being engaged in advising or counseling in law or acting as attorney or counselor-at-law, or in
furnishing the services of a lawyer or lawyers; and it shall be unlawful for any person or association of persons except active
members of the Bar, for or without a fee or consideration, to give legal advice or counsel, perform for or furnish to another
legal services, or to prepare directly or through another for another person, firm or corporation, any will or testamentary
disposition, or instrument of trust, or to organize corporations or prepare for another person, firm or corporation, any other
legal document. Provided, that nothing herein shall prohibit any person from drawing a will for another in an emergency
wherein the imminence of death leaves insufficient time to have the same drawn and its execution supervised by a licensed
attorney-at-law. The provisions of this section shall be in addition to and not in lieu of any other provisions of this Chapter.
Provided, however, this section shall not apply to corporations authorized to practice law under the provisions of Chapter
55B [Professional Corporations Act] of the General Statutes of North Carolina.
§ 84-5. Prohibition as to practice of law by corporation
(a) It shall be unlawful for any corporation to practice law or appear as an attorney for any person in any court in this State, or
before any judicial body or the North Carolina Industrial Commission, Utilities Commission, or the Department of
Commerce, Division of Employment Security, or hold itself out to the public or advertise as being entitled to practice law;
and no corporation shall organize corporations, or draw agreements, or other legal documents, or draw wills, or practice law,
or give legal advice, or hold itself out in any manner as being entitled to do any of the foregoing acts, by or through any
person orally or by advertisement, letter or circular. The provisions of this section shall be in addition to and not in lieu of
any other provisions of Chapter 84. Provided, that nothing in this section shall be construed to prohibit a banking corporation
authorized and licensed to act in a fiduciary capacity [such as named trustee of a trust or executor under a duly-probated Last
Will and Testament of a decedent] from performing any clerical, accounting, financial or business acts required of it in the
performance of its duties as a fiduciary or from performing ministerial and clerical acts in the preparation and filing of such
tax returns as are so required, or from discussing the business and financial aspects of fiduciary relationships. Provided,
however, this section shall not apply to corporations authorized to practice law under the provisions of Chapter 55B
[Professional Corporations Act] of the General Statutes of North Carolina.
To further clarify the foregoing provisions of this section as they apply to corporations which are authorized and licensed to
act in a fiduciary capacity:
(1) A corporation authorized and licensed to act in a fiduciary capacity shall not:
a. Draw wills or trust instruments; provided that this shall not be construed to prohibit an employee of such corporation
from conferring and cooperating with an attorney who is not a salaried employee of the corporation, at the request of
North Carolina Closing Process – Last Rev. 2-24-12
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such attorney, in connection with the attorney's performance of services for a client who desires to appoint the
corporation executor or trustee or otherwise to utilize the fiduciary services of the corporation.
b. Give legal advice or legal counsel, orally or written, to any customer or prospective customer or to any person who is
considering renunciation of the right to qualify as executor or administrator or who proposes to resign as guardian or
trustee, or to any other person, firm or corporation.
c. Advertise to perform any of the acts prohibited herein; solicit to perform any of the acts prohibited herein; or offer to
perform any of the acts prohibited herein.
(2) Except as provided in subsection (b) of this section, when any of the following acts are to be performed in connection
with the fiduciary activities of such a corporation, said acts shall be performed for the corporation by a duly licensed attorney,
not a salaried employee of the corporation, retained to perform legal services required in connection with the particular estate,
trust or other fiduciary matter:
a. Offering wills for probate.
b. Preparing and publishing notice of administration to creditors.
c. Handling formal court proceedings.
d. Drafting legal papers or giving legal advice to spouses concerning rights to an elective share under Article 1A of
Chapter 30 of the General Statutes.
e. Resolving questions of domicile and residence of a decedent.
f. Handling proceedings involving year's allowances of widows and children.
g. Drafting deeds, notes, deeds of trust, leases, options and other contracts.
h. Drafting instruments releasing deeds of trust.
i. Drafting assignments of rent.
j. Drafting any formal legal document to be used in the discharge of the corporate fiduciary's duty.
k. In matters involving estate and inheritance taxes, gift taxes, and federal and State income taxes:
1. Preparing and filing protests or claims for refund, except requests for a refund based on mathematical or
clerical errors in tax returns filed by it as a fiduciary.
2. Conferring with tax authorities regarding protests or claims for refund, except those based on mathematical
or clerical errors in tax returns filed by it as a fiduciary.
3. Handling petitions to the tax court.
l. Performing legal services in insolvency proceedings or before a referee in bankruptcy or in court.
m. In connection with the administration of an estate or trust:
1. Making application for letters testamentary or letters of administration.
2. Abstracting or passing upon title to property.
3. Handling litigation relating to claims by or against the estate or trust.
4. Handling foreclosure proceedings of deeds of trust or other security instruments which are in default.
(3) When any of the following acts are to be performed in connection with the fiduciary activities of such a corporation, the
corporation shall comply with the following:
a. The initial opening and inventorying of safe deposit boxes in connection with the administration of an estate for
which the corporation is executor or administrator shall be handled by, or with the advice of, an attorney, not a
salaried employee of the corporation, retained by the corporation to perform legal services required in connection
with that particular estate.
b. The furnishing of a beneficiary with applicable portions of a testator's will relating to such beneficiary shall, if
accompanied by any legal advice or opinion, be handled by, or with the advice of, an attorney, not a salaried
employee of the corporation, retained by the corporation to perform legal services required in connection with that
particular estate or matter.
c. In matters involving estate and inheritance taxes and federal and State income taxes, the corporation shall not
execute waivers of statutes of limitations without the advice of an attorney, not a salaried employee of the
corporation, retained by the corporation to perform legal services in connection with that particular estate or matter.
d. An attorney, not a salaried employee of the corporation, retained by the corporation to perform legal services
North Carolina Closing Process – Last Rev. 2-24-12
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required in connection with an estate or trust shall be furnished copies of inventories and accounts proposed for filing
with any court and proposed federal estate and North Carolina inheritance tax returns and, on request, copies of
proposed income and intangibles tax returns, and shall be afforded an opportunity to advise and counsel the corporate
fiduciary concerning them prior to filing.
(b) Nothing in this section shall prohibit an attorney retained by a corporation, whether or not the attorney is also a salaried
employee of the corporation, from representing the corporation or an affiliate, or from representing an officer, director, or
employee of the corporation or an affiliate in any matter arising in connection with the course and scope of the employment
of the officer, director, or employee. Notwithstanding the provisions of this subsection, the attorney providing such
representation shall be governed by and subject to all of the Rules of Professional Conduct of the North Carolina State Bar to
the same extent as all other attorneys licensed by this State.
RELEVANT CASE NOTES:
PRACTICE OF LAW EMBRACES THE PREPARATION OF LEGAL DOCUMENTS and contracts by which legal rights
are secured. . . . NOT ALL ACTIVITIES WITHIN DEFINITION ARE UNLAWFUL FOR LAY PERSONS. --It was not
the purpose and intent of this section to make unlawful all activities of lay persons which come within the general definition
of practicing law. . . PERSONS HAVING PRIMARY INTEREST IN TRANSACTION MAY PREPARE NECESSARY
PAPERS. --A person, firm or corporation having a primary interest, not merely an incidental interest, in a transaction, may
prepare legal documents necessary to the furtherance and completion of the transaction without violating this section. . . .
Automobile, furniture, and appliance dealers prepare conditional sale contracts. Banks prepare promissory notes, drafts and
letters of credit. Many lending institutions prepare deeds of trust and chattel mortgages. Owner-vendors and purchasers of
land prepare deeds. All such activities are legal and do not violate the statute so long as the actor has a primary interest in the
transaction. . . PREPARATION OF DOCUMENTS BY EMPLOYEES OF CORPORATIONS. --A person who, in the
course of his employment by a corporation, prepares a legal document in connection with a business transaction in which the
corporation has a primary interest, the corporation being authorized by law and its charter to transact such business, does not
violate the statute, for his act in so doing is the act of the corporation in the furtherance of its own business. A deed of trust is
a legal document. . . THE GRANTOR OR THE BENEFICIARY IN A DEED OF TRUST MAY PREPARE THE
INSTRUMENT with impunity if the latter is extending credit to the former; the named trustee may not do so, for his interest
is only incidental. State v. Pledger, 257 N.C. 634, 127 S.E.2d 337 (1962), commented on in 41 N.C.L. Rev. 225 (1963).
A LICENSED ATTORNEY WHO IS A FULL-TIME EMPLOYEE OF AN INSURANCE COMPANY may not ethically
represent one of the company's insureds as counsel of record in an action brought by a third party for a claim covered by the
terms of the insurance policy or appear as counsel of record for the insured in the prosecution of a subrogation claim for
property damage. Gardner v. North Carolina State Bar, 316 N.C. 285, 341 S.E.2d 517 (1986).
§ 84-8. Punishment for violations
(a) Any person, corporation, or association of persons violating any of the provisions of G.S. 84-4 through
G.S. 84-6 or G.S. 84-9 shall be guilty of a Class 1 misdemeanor.
(b) No person shall be entitled to collect any fee for services performed in violation of G.S. 84-4 through
G.S. 84-6, G.S. 84-9, or G.S. 84-10.1. [Effective 12/1/11]
"§ 84-10.1. Private cause of action for the unauthorized practice of law.
If any person knowingly violates any of the provisions of G.S. 84-4 through G.S. 84-6 or G.S. 84-9,
fraudulently holds himself or herself out as a North Carolina certified paralegal by use of the designations set
forth in G.S. 84-37(a), or knowingly aids and abets another person to commit the unauthorized practice of
law, in addition to any other liability imposed pursuant to this Chapter or any other applicable law, any
person who is damaged by the unlawful acts set out in this section shall be entitled to maintain a private
cause of action to recover damages and reasonable attorneys' fees. [Effective 10/1/11]
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North Carolina Closing Process – Last Rev. 2-24-12
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Authorized Practice Advisory Opinion 2002-1
January 24, 2003
Revised January 26, 2012
On the Role of Laypersons in the Consummation of Residential Real Estate Transactions
The North Carolina State Bar has been requested to interpret the North Carolina unauthorized practice of law statutes (N.C.
Gen. Stat. §§84-2.1 to 84-5) as they apply to residential real estate transactions. The State Bar issues the following
authorized practice of law advisory opinion pursuant to N.C. Gen. Stat. §84-37(f) after careful consideration and
investigation. This opinion supersedes any prior opinions and decisions of any standing committee of the State Bar
interpreting the unauthorized practice of law statutes to the extent those opinions and decisions are inconsistent with the
conclusions expressed herein.As a result of its review of the activities of more than 50 nonlawyer service providers since the
adoption of this opinion on January 24, 2003, including injunctions issued against two companies, the Committee is
clarifying the opinion concerning issues that it has addressed since adoption of the opinion.
Issue 1:
May a nonlawyer handle a residential real estate closing for one or more of the parties to the transaction?
Opinion 1:
No. Residential real estate transactions typically involve several phases, including the following: reviewing the purchase
agreement for any conditions that must be met before closing; abstracting titles; providing an opinion on title; applying for
title insurance policies, including title insurance policies that may require tailored coverage to protect the interests of the
lender, the owner, or both[i]; preparing legal documents, such as deeds (in the case of a purchase transaction), deeds of
trust, and lien waivers or affidavits; interpreting and explaining documents implicating parties’ legal rights, obligations, and
options; resolving possible clouds on title and issues concerning the legal rights of parties to the transaction; overseeing
execution and acknowledgement of documents in compliance with legal mandates; handling the recordation and cancellation
of documents in accordance with North Carolina law; disbursing proceeds when legally permitted after legally-recognized
funds are available and all closing conditions have been satisfied; and providing a post-closing final opinion of title for title
insurance after all prior liens have been satisfied. These and other functions are sometimes called, collectively, the “closing”
of the residential real estate transaction. As detailed below, the North Carolina General Assembly has determined specifically
that only persons who are licensed to practice law in this state may handle most of these functions.[ii]
A person who is not licensed to practice law in North Carolina and is not working under the direct supervision of an active
member of the State Bar may not perform functions or services that constitute the practice of law.[iii] Under the express
language of N.C. Gen. Stat. §§ 84-2.1 and 84-4, a non-lawyer who is not working under the direct supervision of an active
member of the State Bar would be engaged in the unauthorized practice of law if he or she performs any of the following
functions for one or more of the parties to a residential real estate transaction: (i) preparing or aiding in preparation of
deeds, deeds of trust, lien waivers or affidavits, or other legal documents; (ii) abstracting or passing upon titles; or (iii)
advising or giving an opinion upon the legal rights or obligations of any person, firm, or corporation.Under the express
language of N.C. Gen. Stat. § 84-4, it is unlawful for any person other than an active member of the State Bar to hold
himself or herself out as competent or qualified to give legal advice or counsel or as furnishing any services that constitute
the practice of law.Additionally, under N.C. Gen. Stat. § 84-5, a business entity, including a corporation or limited liability
company, may not provide or offer to provide legal services or the services of attorneys to its customers even if the services
are performed by licensed attorneys employed by the entity.See, Duke Power Co. v. Daniels, 86 N.C. App. 469, 358 S.E.2d
87 (1987); Gardner v. North Carolina State Bar, 316 N.C. 285, 341 S.E.2d 517 (1986), and State ex rel. Seawell v. Carolina
Motor Club, Inc., 209 N.C. 624, 184 S.E. 540 (1936).
Accordingly, a nonlawyer is engaged in the unauthorized practice of law if he or she performs any of the following functions
in connection with a residential real estate closing (identified only as examples):
1. Abstracts or provides an opinion on title to real property;
2. Explains the legal status of title to real estate, the legal effect of anything found in the chain of title, or the legal effect of
an item reported as an exception in a title insurance commitment except as necessary to underwrite a policy of insurance
and except that a licensed title insurer, agency, or agent may explain an underwriting decision to an insured or prospective
insured, including providing the reason for such decision;
3. Explains or gives advice or counsel about the rights or responsibilities of parties concerning matters disclosed by a land
survey under circumstances that require the exercise of legal judgment or that have implications with respect to a party’s
legal rights or obligations;
North Carolina Closing Process – Last Rev. 2-24-12
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4. Provides a legal opinion, advice, or counsel in response to inquiries by any of the parties regarding legal rights or
obligations of any person, firm, or corporation, including but not limited to the rights and obligations created by the
purchase agreement, a promissory note, the effect of a pre-payment penalty, the rights of parties under a right of
rescission, and the rights of a lender under a deed of trust;
5. Advises, counsels, or instructs a party to the transaction with respect to alternative ways for taking title to the property
or the legal consequences of taking title in a particular manner;
6. Drafts a legal document for a party to the transaction or assists a party in the completion of a legal document, or selects
or assists a party in selecting a form legal document among several forms having different legal implications;
7. Explains or recommends a course of action to a party to the transaction under circumstances that require the exercise of
legal judgment or that have implications with respect to the party’s legal rights or obligations;
8. Attempts to settle or resolve a dispute between the parties to the transaction that will have implications with respect to
their respective legal rights or obligations;
9. Determines that all conditions of the purchase agreement or the loan closing instructions have been satisfied in
accordance with the buyer’s or the lender’s interests or instructions;
10 Determines that the deed and deed of trust may be recorded after an update of title for any intervening conveyances or
liens since the preliminary opinion;
11. Determines that the funds may be legally disbursed pursuant to the North Carolina Good Funds Settlement Act, N.C.
Gen. Stat. § 45A-1 et seq.[iv]
The foregoing list of examples of functions that constitute the practice of law is not exclusive, but reflects a range of
responsibilities and duties that involve the following: the exercise of legal judgment; the preparation of legal documents
such as deeds, deeds of trust, and title opinions; the explanation or interpretation of legal documents in circumstances that
require the exercise of legal judgment; the provision of legal advice or opinions; and the performance of other services that
constitute the practice of law.
Issue 2:
May a nonlawyer who is not acting under the supervision of a lawyer licensed in North Carolina (1) present and identify the
documents necessary to complete a North Carolina residential real estate closing, direct the parties where to sign the
documents, and ensure that the parties have properly executed the documents; and (2) receive and disburse the closing
funds?
Opinion 2:
Yes. So long as a nonlawyer does not engage in any of the activities referenced in Opinion 1, or in other activities that
likewise constitute the practice of law, a nonlawyer may: (1) present and identify the documents necessary to complete a
North Carolina residential real estate closing, direct the parties where to sign the documents, and ensure that the parties
have properly executed the documents; or (2) receive and disburse the closing funds.
Although these limited duties may be performed by nonlawyers, this does not mean that the nonlawyer is handling the
closing.Since, as described in issue 1 above, the closing is a collection of services, most of which involve the practice of law,
a lawyer must provide the necessary legal services.[v]And, since N.C. Gen. Stat. § 84-5 prohibits nonlawyers from arranging
for or providing the lawyer or any legal services, nonlawyers may not advertise or represent to lenders, buyers/borrowers,
or others in any manner that suggests that the nonlawyer will (i) handle the “closing;” (ii) provide the legal services
associated with a closing, such as providing title searches, title opinions, document preparation, or the services of a lawyer
for the closing; or (iii) “represent” any party to the closing. [vi]The lawyer must be selected by the party for whom the legal
services will be provided.
Notwithstanding this opinion, evidence considered by the State Bar with respect to this advisory opinion indicates that, at
the time documents are presented to the parties for execution, a lawyer who is present may identify or be asked about
important issues affecting the legal rights or obligations of the parties. A lawyer may provide important legal guidance about
such issues, but a nonlawyer is not permitted to do so. Moreover, a consumer’s retention of a licensed North Carolina lawyer
provides financial protection to the consumer. The North Carolina Rules of Professional Conduct require a lawyer to properly
handle all fiduciary funds, including residential real estate closing proceeds. In the event a lawyer mishandles the closing
proceeds, the lawyer is subject to professional discipline, and the State Bar Client Security Fund may provide financial
assistance for a person injured by the lawyer’s improper application of funds. On the whole, the evidence considered by the
State Bar indicates that it is in the best interest of a consumer to be represented by a lawyer with respect to all aspects of a
residential real estate transaction.
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The evidence the State Bar has considered suggests, however, that performing administrative or ministerial activities in
connection with the execution of residential real estate closing documents and the receipt and disbursement of the closing
proceeds does not necessarily require the exercise of legal judgment or the giving of legal advice or opinions. Indeed, the
execution of closing documents and the disbursement of closing proceeds may be accomplished—and often have been
accomplished—by mail, by email, or by other electronic means, or by some other procedure that would not involve the
lawyer and the parties being physically present at one place and time. The State Bar therefore concludes that it should not
be presumed that performing the task of overseeing the execution of residential real estate closing documents and receiving
and disbursing closing proceeds necessarily involves giving legal advice or opinions or otherwise engaging in activities that
constitute the practice of law.
Nonlawyers who undertake such responsibilities, and those who retain their services, should also be aware that (1) the
North Carolina State Bar retains oversight authority concerning complaints about activities that constitute the unauthorized
practice of law; (2) the North Carolina criminal justice system may prosecute instances of the unauthorized practice of law;
and (3) that N.C. Gen. Stat. §84-10 provides a private cause of action to recover damages and attorneys’ fees to any
person who is damaged by the unauthorized practice of law against both the person who engages in unauthorized practice
and anyone who knowingly aids and abets such person. In addition, non-lawyers and consumers should bear in mind that
other governmental authorities such as the Federal Trade Commission, the North Carolina Attorney General, district
attorneys, and the banking commissioner, have jurisdiction over unfair trade practices and violations of requirements
regarding lending practices.
Endnotes
[i] By statute, title insurance in North Carolina can be issued only after the title insurance company has received an opinion
of title from a licensed North Carolina attorney who is not an employee or agent of the company and who “has conducted or
caused to be conducted under the attorney's direct supervision a reasonable examination of the title.”N.C. Gen. Stat. § 5826-1.
[ii] Except as permitted under State v. Pledger, 257 N.C. 634, 127 S.E.2d 337 (1962), which allows a party having a
“primary interest” in a transaction to prepare deeds of trust and other documents to effectuate the transaction.
[iii] The State Bar notes that the North Carolina General Assembly and Supreme Court are the entities that have the power
to make the ultimate determination whether an activity constitutes the practice of law.
[iv] Since the original adoption of this opinion, the Committee has reviewed numerous complaints concerning nonlawyers,
many of whom hold out to the closing parties that they will conduct “closings,” including disbursement of funds, at any time
of day, including after normal business hours.However, under the Good Funds Settlement Act, N.C. Gen. Stat. § 45A-4,
funds may not be disbursed until the deed and deed of trust (if any) have been recorded, which in most counties requires
physical delivery to the Register of Deeds during normal business hours.Accordingly, while execution of the documents may
be conducted at any time, the actual “closing” and disbursement of funds may not occur until after the required documents
are recorded.
[v] Except as permitted under State v. Pledger, supra, or by an individual pro se.
[vi] Almost without exception, these nonlawyer service providers are corporations or limited liability companies that market
their services to lenders, not consumers.Most are also title insurance agents.Accordingly, lenders commonly inform
borrowers that the nonlawyer will be conducting the closing without any meaningful opportunity for the borrower to decide
to retain a lawyer to protect its interests.Additionally, when the nonlawyer is a title insurance agent, the borrower usually is
given no choice on insurer or available rates.The Committee expresses no opinion whether these actions may violate N.C.
Gen. Stat. § 75-17, which prohibits a lender from requiring its borrower to obtain a policy of title insurance from a particular
insurance company, agent, broker or other person specified by the lender.Title companies (and other parties) may refer
lenders or borrowers to attorneys at their customer’s request, but may not require the use of a specific attorney or charge a
fee for any such referral.
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APPLICABLE STATUTES RE: DISBURSEMENT OF FUNDS AT CLOSING
GOOD FUNDS SETTLEMENT ACT (Some relevant provisions)
§ 45A-2. Applicability
This Chapter applies only to real estate transactions involving a one- to four-family residential dwelling or a lot restricted to
residential use.
§ 45A-3. Definitions
As used in this Chapter, unless the context otherwise requires:
(1) "Bank" means a financial institution, including but not limited to a national bank, state chartered bank, savings bank, or
credit union that is insured by the Federal Deposit Insurance Corporation or a comparable agency of the federal or state
government.
(2) "Borrower" means the maker of the promissory note evidencing the loan to be delivered at the closing.
(3) "Cashier's check" means a check that is drawn on a bank, is signed by an officer or employee of the bank on behalf of the
bank as drawer, is a direct obligation of the bank, and is provided to a customer of the bank or acquired from the bank for
remittance purposes.
(4) "Certified check" means a check with respect to which the drawee bank certifies by signature on the check of an officer or
other authorized employee of the bank that (i) the signature of the drawer on the check is genuine and the bank has set aside
funds that are equal to the amount of the check and will be used to pay the check or (ii) the bank will pay the check upon
presentment.
(5) "Closing" means the time agreed upon by the purchaser, seller, and lender (if applicable), when the execution and
delivery of the documents necessary to consummate the transaction contemplated by the parties to the contract occurs, and
includes a loan closing.
(6) "Closing funds" means the gross or net proceeds of the real estate transaction, including any loan funds, to be disbursed
by the settlement agent as part of the disbursement of settlement proceeds on behalf of the parties.
(7) "Collected funds" means funds deposited and irrevocably credited to a settlement agent's account used to fund the
disbursement of settlement proceeds which account is a trust account, escrow account, or an account held by a company or its
subsidiary which is licensed and supervised by the North Carolina Commissioner of Banks.
(8) "Disbursement of settlement proceeds" means the payment of all closing funds from the transaction by the settlement
agent to the persons or entities entitled to that payment.
(9) "Lender" means any person or entity engaged in making or originating loans secured by mortgages or deeds of trust on
real estate.
(10) "Loan closing" means the time agreed upon by the borrower and lender, as applicable, when the execution and delivery
of loan documents by the borrower occurs.
(11) "Loan documents" means the note evidencing the debt due to the lender, the deed of trust or mortgage to secure that debt
to the lender, and any other documents required by the lender to be executed by the borrower as part of the loan closing
transaction.
(12) "Loan funds" means the gross or net proceeds of the loan to be disbursed by the settlement agent as part of the
disbursement of settlement proceeds on behalf of the borrower and lender.
(13) "Party" or "parties" means the seller, purchaser, borrower, lender, and settlement agent, as applicable to the subject
transaction.
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(14) "Settlement" means the time when the settlement agent has received the duly executed deed, deed of trust or mortgage,
and other loan documents and funds required to carry out the terms of the contracts between the parties.
(15) "Settlement agent" means the person or persons responsible for conducting the settlement and disbursement of the
settlement proceeds, and includes any individual, corporation, partnership, or other entity conducting the settlement and
disbursement of the closing funds.
(16) "Teller's check" means a check provided to a customer of a bank or acquired from a bank for remittance purposes, that is
drawn by the bank, and drawn on another bank or payable through or at a bank.
§ 45A-4. Duty of settlement agent
(a) The settlement agent shall cause recordation of the deed, if any, the deed of trust or mortgage, or other loan documents
required to be recorded at settlement. The settlement agent shall not disburse any of the closing funds prior to the recordation
of any deeds or loan documents required to be filed by the lender, if applicable, and verification that the closing funds used to
fund disbursement are deposited in the settlement agent's trust or escrow account in one or more forms prescribed by this
Chapter. Unless otherwise provided in this Chapter, a settlement agent shall not cause a disbursement of settlement proceeds
unless those settlement proceeds are collected funds. Notwithstanding that a deposit made by a settlement agent to its trust or
escrow account does not constitute collected funds, the settlement agent may cause a disbursement of settlement proceeds
from its trust or escrow account in reliance on that deposit if the deposit is in one or more of the following forms:
(1) A certified check;
(2) A check issued by the State, the United States, a political subdivision of the State, or an agency or instrumentality of the
United States, including an agricultural credit association;
(3) A cashier's check, teller's check, or official bank check drawn on or issued by a financial institution insured by the
Federal Deposit Insurance Corporation or a comparable agency of the federal or state government;
(4) A check drawn on the trust account of an attorney licensed to practice in the State of North Carolina;
(5) A check or checks drawn on the trust or escrow account of a real estate broker licensed under Chapter 93A of the
General Statutes;
(6) A personal or commercial check or checks in an aggregate amount not exceeding five thousand dollars ($ 5,000) per
closing if the settlement agent making the deposit has reasonable and prudent grounds to believe that the deposit will be
irrevocably credited to the settlement agent's trust or escrow account;
(7) A check drawn on the account of or issued by a mortgage banker licensed under Article 19A of Chapter 53 of the
General Statutes that has posted with the Commissioner of Banks a surety bond in the amount of at least three hundred
thousand dollars ($ 300,000). The surety bond shall be in a form satisfactory to the Commissioner and shall run to the State
for the benefit of any settlement agent with a claim against the licensee for a dishonored check.
(b) If the settlement agent receives information from the lender as provided in G.S. 45A-5(b) or otherwise has actual
knowledge that a mortgage broker or other person acted as a mortgage broker in the origination of the loan, the settlement
agent shall place an entry on page 1 of the deed of trust showing the name of the mortgage broker or other person who acted
as a mortgage broker in the origination of the loan. Information pertaining to the identity of the mortgage broker or other
person who acted as a mortgage broker in the origination of the loan shall not be considered confidential information. The
terms "mortgage broker" and "act as a mortgage broker" shall have the same meaning as provided in [G.S. 53-244.030].
§ 45A-5. Duty of lender, purchaser, or seller
(a) The lender, purchaser, or seller shall, at or before closing, deliver closing funds, including the gross or net loan funds, if
applicable, to the settlement agent either in the form of collected funds or in the form of a negotiable instrument described in
G.S. 45A-4(a) (1) through (7), provided that the lender, purchaser, or seller, as applicable, shall cause that negotiable
instrument to be honored upon presentment for payment to the bank or other depository institution upon which the instrument
is drawn. However, in the case of a refinancing, or any other loan where a right of rescission applies, the lender shall, no later
than the business day after the expiration of the rescission period required under the federal Truth-in-Lending Act, 15 U.S.C.
§ 1601, et seq., cause disbursement of loan funds to the settlement agent in one or more of the forms prescribed by provisions
in this Chapter.
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(b) (Effective July 5, 2007, and applicable to deeds of trust registered on or after April 1, 2008) The lender shall include in
the loan closing instructions to the settlement agent the name of the mortgage broker or other person, if any, who acted as a
mortgage broker in the origination of the loan.
§ 45A-7. Penalty
Any party violating this Chapter is liable to any other party suffering a loss due to that violation for that other party's actual
damages plus reasonable attorneys' fees. In addition, any party violating this Chapter shall pay to the party or parties
suffering a loss an amount equal to one thousand dollars ($ 1,000) or double the amount of interest payable on any loan for
the first 60 days after the loan closing, whichever amount is greater.
§ 45A-8. Embezzlement of closing funds by settlement agent
(a) All closing funds received by a settlement agent are trust or escrow funds received by the settlement agent in a fiduciary
capacity.
(b) A settlement agent in the disbursement of settlement proceeds shall account for and pay the closing funds to the parties or
entities identified for payment of the closing funds pursuant to the settlement agreement approved by the parties to the
transaction.
(c) Except as to such portions of the closing funds representing the settlement agent's fees and expenses, a settlement agent
shall be subject to the embezzlement provisions of G.S. 14-90.
" 45A-9. Interest on settlement agent's real estate trust and escrow accounts.
(a) A settlement agent who maintains a trust or escrow account for purposes of receiving and disbursing
closing funds and loan funds shall pay any interest earned on funds held in those accounts to the North
Carolina State Bar to be used for the purposes authorized by the North Carolina State Bar under the Interest
on Lawyers' Trust Account Program.
(b) The North Carolina State Bar shall adopt rules for the collection and disbursement of funds required to be
paid to the North Carolina State Bar under subsection (a) of this section.
[Effective Jan. 1, 2012]
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