15VAC5-80 Regulations Under the Virginia Consumer Real Estate Settlement Protection Act

REGULATIONS

Vol. 25 Iss. 4 - October 27, 2008

TITLE 15. JUDICIAL

VIRGINIA STATE BAR

Chapter 80

Proposed Regulation

REGISTRAR'S NOTICE: The Virginia State Bar is exempt from the Administrative Process Act in accordance with § 2.2-4002 A 2 of the Code of Virginia, which exempts courts, any agency of the Supreme Court, and any agency that by the Constitution is expressly granted any of the powers of a court of record.

Title of Regulation: 15VAC5-80. Regulations Under the Virginia Consumer Real Estate Settlement Protection Act (amending 15VAC5-80-40, 15VAC5-80-50).

Statutory Authority: § 6.1-2.25 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Agency Contact: Mary Yancey Spencer, Deputy Executive Director, Virginia State Bar, 707 East Main Street, Richmond, VA 23219, telephone [phone] or email [e-mail].

Summary:

The amendments eliminate a requirement to give each registrant a copy of Consumer Real Estate Settlement Protection Act (CRESPA) guidelines and allow registrants to provide a copy of the surety bond rather than the original.

15VAC5-80-40. Unauthorized practice of law guidelines; investigation of complaints.

The Bar will issue guidelines under CRESPA and in consultation with the SCC and the board to assist settlement agents in avoiding and preventing the unauthorized practice of law in connection with the furnishing of escrow, closing or settlement services. In conformity with CRESPA, the rules of the Virginia Supreme Court and the Bar's UPL opinions, these guidelines will delineate activities which can and cannot be carried out by registered nonattorney settlement agents in conducting settlements. The guidelines will be revised from time to time as necessary.

A copy of the guidelines will be provided by the Bar to each registered settlement agent at the time of initial registration and at each reregistration available on the Bar's website for review. The guidelines will also be published by the Bar in the Virginia Lawyer Register and furnished to the SCC, the board, and all other state and federal agencies that regulate financial institutions, as well as to members of the general public upon request. The guidelines may be photocopied as necessary.

The Bar will continue to receive and investigate unauthorized practice of law complaints in the real estate settlement area, as well as in other fields, under its unauthorized practice of law rules and procedures.

If the Bar receives complaints against nonattorney settlement agents that do not allege the unauthorized practice of law, it will refer the complaints to the appropriate licensing authority that has jurisdiction over the subject of the complaint. If the complaint involves noncompliance with 15VAC5-80-30, the Bar will conduct an informal investigation. If the Bar believes a violation has occurred, it will notify the settlement agent in writing. If the apparent violation is not rectified within 30 days, the Bar will refer the matter to the appropriate licensing authority for further enforcement action.

15VAC5-80-50. Attorney settlement agent compliance.

A. Attorney settlement agent certification. Each attorney settlement agent shall, at the time of initial registration and each subsequent reregistration, certify on the form available from the Bar for that purpose, that the attorney settlement agent has in full force and effect the following insurance and bond coverages, and that such coverages will be maintained in full force and effect throughout the time the attorney settlement agent acts, offers or intends to act in that capacity:

1. A lawyer's professional liability insurance policy issued by a company authorized to write such insurance in Virginia providing first dollar coverage and limits of at least $250,000 per claim covering the licensed attorney acting, offering or intending to act as a settlement agent. The policy may also cover other attorneys practicing in the same firm or legal entity.

2. A blanket fidelity bond or employee dishonesty insurance policy issued by a company authorized to write such bonds or insurance in Virginia providing limits of at least $100,000 covering all other employees of the attorney settlement agent or the legal entity in which the attorney settlement agent practices.

3. A surety bond issued by a company authorized to write such bonds in Virginia, on a form approved by the Virginia State Bar, providing limits of at least $200,000 covering the licensed attorney acting, offering or intending to act as a settlement agent. A copy of the approved bond form is available from the Bar. The bond may also cover other attorney settlement agents practicing in the same firm or legal entity. The A copy of the original surety bond must be attached to the attorney settlement agent's certification form and furnished to the Bar; a surety bond on which a law firm is named as principal may be furnished by the firm or any one attorney settlement agent in the firm, with other such attorney settlement agents in the same firm attaching a copy to their forms.

The Bar reserves the right to require other evidence of the above insurance and bond coverages beyond the attorney's certification and surety bond, at its discretion.

An attorney settlement agent who has no employees other than the attorney settlement agent or other licensed owner(s), partner(s), shareholder(s), or member(s) of the legal entity in which the attorney settlement agent practices may apply to the Bar for a waiver of the coverage required in subdivision A 2 of this section, using the waiver request form available from the Bar. Such waiver requests will be acted on by the Executive Committee of the Bar, whose decision shall constitute final action by the agency.

B. Separate fiduciary trust account. Each attorney settlement agent shall maintain one or more separate and distinct fiduciary trust account(s) used only for the purpose of handling funds received in connection with escrow, closing or settlement services. Funds received in connection with real estate transactions not covered by CRESPA may also be deposited in and disbursed from such account(s). All funds received by an attorney settlement agent in connection with escrow, closing or settlement services shall be deposited in and disbursed from the separate fiduciary account(s) in conformity with both the Bar's disciplinary rules and CRESPA. These separate fiduciary trust accounts shall be maintained in the same manner and subject to the same rules as those promulgated by the Bar for other lawyer trust accounts, as well as in conformity with CRESPA. One separate fiduciary trust account may be maintained and used by all attorney settlement agents practicing in the same firm or legal entity.

C. Settlement statements. All settlement statements for escrow, closing and settlement services governed by CRESPA and these regulations shall be in writing and identify, by name and business address, the settlement agent.

D. Complaints against attorney settlement agents. The Bar shall receive complaints and/or investigate alleged violations of CRESPA or these regulations by attorney settlement agents. If, after investigation, the Bar does not have reasonable cause to believe that one or more violations of CRESPA and/or these regulations have occurred, the Bar may dismiss the complaint as unfounded.

If, after investigation, the Bar has reasonable cause to believe that one or more violations have occurred, the following procedures shall apply:

1. The attorney settlement agent shall be notified in writing of the alleged violation(s).

2. The attorney settlement agent shall have 30 days from the date of such notification to respond in writing to the alleged violations. If, after receipt of the response, the Bar no longer has reasonable cause to believe that one or more violations of CRESPA and/or these regulations have occurred, the Bar may dismiss the complaint as unfounded.

3. If the Bar believes the alleged violation presents or presented a risk to consumers protected under CRESPA, the Bar may request a hearing and issue an order requiring the attorney settlement agent to appear at the hearing, whether or not the attorney settlement agent has responded in writing to the notice of alleged violation(s) or the 30-day response time period has lapsed.

4. In conducting investigations of alleged violations of CRESPA and/or these regulations by attorney settlement agents, the Bar, by Bar Counsel, shall have the authority to issue summonses or subpoenas to compel the attendance of witnesses and the production of documents necessary and material to any inquiry.

5. The following shall be applicable to hearings on alleged violations of CRESPA and/or these regulations:

a. Hearings shall be held before the disciplinary board within 60 days of the issuance of the Bar's order to appear.

b. The standard of proof of violations of CRESPA or these regulations shall be clear and convincing evidence.

c. Hearings shall be conducted in the same manner as attorney misconduct hearings as set out in Rules of Court, Part Six, Section IV, Paragraph 13.

d. Agreed dispositions may be entered into in the same manner as agreed dispositions at the disciplinary board in attorney misconduct cases.

e. The attorney settlement agent's prior disciplinary record and prior record of violations of CRESPA and/or these regulations shall be made available to the disciplinary board during the sanction stage of a hearing. The prior record of violations of CRESPA and/or these regulations may be made available to Bar subcommittees, district committees, the disciplinary board or a three-judge circuit court prior to the imposition of any sanction for attorney misconduct.

f. If the attorney settlement agent is found to have violated CRESPA and/or these regulations, the attorney settlement agent may be subject to the following penalties, at the disciplinary board's discretion:

(1) A penalty not exceeding $5,000 for each violation;

(2) Revocation or suspension of the attorney settlement agent's registration; and

(3) Any other sanction available to the disciplinary board in attorney disciplinary proceedings under the rules of the Virginia Supreme Court, including, but not limited to, revocation or suspension of the attorney settlement agent's license to practice law.

6. The disciplinary board shall assess costs in accordance with the same rules and procedures that apply to the imposition of costs in attorney misconduct cases.

7. All matters and proceedings pertaining to alleged violations of CRESPA and/or these regulations are public. Related attorney misconduct cases shall be heard by the disciplinary board together with alleged violations of CRESPA and/or these regulations. Any related disability issues shall be heard by the disciplinary board separately.

8. The Clerk of the Disciplinary System of the Bar shall maintain files and records pertaining to ended cases involving alleged violations of CRESPA and/or these regulations. The clerk shall follow the same file destruction policies that are utilized in attorney misconduct cases.

9. The Bar may proceed against an attorney settlement agent for alleged violations of CRESPA and/or these regulations notwithstanding that the attorney settlement agent has resigned from the practice of law, surrendered his license to practice law in the Commonwealth of Virginia or had his license to practice law in the Commonwealth of Virginia revoked.

10. An appeal from an order of the disciplinary board imposing sanctions under CRESPA and/or these regulations shall be conducted in accordance with the provisions of Rules of Court, Part Six, Section IV, Paragraph 13 pertaining to an appeal of an order of the disciplinary board imposing sanctions upon findings of attorney misconduct.

VA.R. Doc. No. R09-1636; Filed October 7, 2008, 8:02 a.m.