Can a lawyer close loans and certify documents the lender prepared, when the lawyer does not actually supervise the drafting?

Plain-English summary

The committee considered a lending institution that prepared all loan closing documents itself but required its closing attorney to comply with the Scrivener's Statute (KRS 382.335) and charged for the document preparation, asking whether a lawyer could close such loans whether the preparation charge was stated separately to the borrower or instead collected from the closing attorney. The answer was no.

Relying on Opinion KBA E-39, the committee said a lending institution may perform the mechanical labor of preparing documents affecting title only under a lawyer's supervision, in which case the lawyer may properly comply with KRS 382.335; if the lawyer does not at least supervise the preparation, he may not comply with the statute. The committee acknowledged the difficulty of defining "supervision" but found a definition unnecessary: if the lawyer supervises in some meaningful way he is entitled to payment, and if he does not, he is not entitled to payment for the preparation.

The committee concluded the described arrangements made clear the lawyer was not in fact expected to supervise preparation in any meaningful way and was not to be paid for doing so, so he could not comply with KRS 382.335. It noted that inquiries about lending institutions and their lawyers seemed endless and that the institutions could structure their arrangements to avoid forcing repeated ethics inquiries.

Currency note

This opinion was issued in 1975 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer certify closing documents the lender's own staff prepared?

A: Only if the lawyer meaningfully supervised the preparation. The committee held that without such supervision, the lawyer could not comply with the Scrivener's Statute.

Q: Did how the preparation fee was collected change the answer?

A: No. The committee said the arrangements, whether the charge was stated separately to the borrower or collected from the attorney, all showed the lawyer was not expected to supervise, so the answer was no in each.

Q: When is a lawyer entitled to payment for document preparation?

A: The committee said the lawyer is entitled to payment if he supervises preparation in some meaningful way, and not entitled if he does not.

Background and rules framework

The opinion construed the Scrivener's Statute, KRS 382.335, against the principle that a non-lawyer may prepare title documents only under a lawyer's meaningful supervision, drawing on Opinion KBA E-39. The modern analogs are Model Rule 5.5 (unauthorized practice of law) and Model Rule 5.3 (responsibilities regarding non-lawyer assistance).

Citations and references

Rules of Professional Conduct:

• Modern analogs Model Rule 5.5 (unauthorized practice) and Model Rule 5.3 (supervising non-lawyer assistance)

Statutes:

• KRS 382.335 (Scrivener's Statute)

Other opinions cited:

• KBA Opinion E-39 (1970)

See also

• KBA Ethics Op. E-147: Lender-Referred Title Work
• KBA Ethics Op. E-150: Insurer Estate-Planning Lawyer

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-121.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-121
Issued: July 1975

This opinion was decided under the Code of Professional Responsibility, which was in effect from 1971 to 1990. Lawyers should consult the current version of the Rules of Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org), before relying on this opinion.

Question:

A lending institution prepares all loan closing documents itself but requires its closing attorney to comply with the Scrivener's Statute, KRS 382.335. The institution makes a charge for preparation of the closing documents. May a lawyer properly close these loans (1) where the charge for preparation of the documents is stated to, and collected from, the borrower separately and (2) where the preparation charge is not stated to the borrower but is collected from the closing attorney, either directly or by docking part of the title examination fee that was stated to the borrower?

Answer:

No.

References:

Opinion KBA E-39 (1970); KRS 382.335

OPINION

It appears to us that this question was answered squarely in the Opinion KBA E-39.

A lending institution may perform the mechanical labor of preparing documents affecting title to real estate if it is done under the supervision of a lawyer, Opinion KBA E-39 (1970). In such cases, the lawyer may properly comply with KRS 382.335. If he does not at least supervise the preparation of such documents, he may not comply with KRS 382.335.

We understand the difficulty of defining "supervision" in this context. However, such a definition is unnecessary to resolve the question presented. If the lawyer supervises preparation in some meaningful way, he is entitled to payment for his services. If he does not so supervise, he is not entitled to payment for services in preparation of the documents.

The arrangements presented in the question make it clear the lawyer is not in fact expected to supervise preparation of the documents in any meaningful way and is not to be paid for doing so. Consequently, he may not comply with KRS 382.335.

Inquiries concerning the relationship of lending institutions with their lawyers appear to be endless. It may be suggested that the differences between arrangements heretofore approved and the arrangement here condemned are merely formal. That may be true, but it only suggests that the lending institutions could make arrangements with their lawyers without forcing these repeated ethics inquiries on us.

Note to Reader

This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.