A. INTRODUCTION AND SUMMARY OF JOINT SUBCOMMITTEE ACTIVITIES

House Joint Resolution 210 (1996) (Appendix A) established a joint subcommittee to study the real estate settlement market and to determine whether its current mix of participants and regulatory oversight provides sufficient protection for the general public. Real estate settlements encompass the administrative, financial, and legal activities required to complete the purchase and sale of real estate. The joint subcommittee members focused on the Virginia State Bar Council's formal opinion that the conduct of real estate settlements should be restricted to licensed attorneys in order to prevent the unauthorized practice of law by non-lawyer settlement agents. Currently, both attorneys and non-attorneys are permitted to conduct such settlements in Virginia.

The following General Assembly members served on the joint subcommittee: Delegates Barlow of Smithfield, Keating of Franconia, Moore of Portsmouth, and Van Yahres of Charlottesville appointed by the Speaker of the House, together with Senators Barry of Fairfax, Benedetti of Richmond, and Saslaw of Springfield appointed by the Senate Committee on Privileges and Elections. Delegate Barlow chaired the joint subcommittee, and Senator Benedetti served as its vice-chairman.

Over the course of three meetings convened in July, October and December 1996, the joint subcommittee received testimony from settlement attorneys, title insurance companies, banking institutions, and independent settlement agents. A public hearing was also convened to receive testimony from members of the public concerning their experiences with non-lawyer and lawyer settlement agents in real estate settlement transactions. The joint subcommittee also received regular briefings and updates from Virginia State Bar representatives concerning the development of its council's opinion that the conduct of real estate settlements by non-lawyers constitutes the unauthorized practice of law.

B. LEGISLATIVE PROPOSALS BEFORE JOINT SUBCOMMITTEE

The joint subcommittee concluded its work at a final meeting in December just prior to the 1997 General Assembly Session. This meeting was convened to receive and review legislation proposed by one of its members and by the Coalition for Choice in Real Estate Closings ("the coalition"), an association representing title companies, banks, realtors and lay settlement agents. Senator Saslaw requested the joint subcommittee's endorsement of a bill prohibiting the Supreme Court's issuance of any rule limiting the conduct of real estate closings to attorneys. A motion to recommend failed three to four.

The coalition's proposal, entitled "The Consumer Real Estate Settlement Protection Act," or CRESPA, required all persons engaged in conducting real estate settlements as settlement agents to be licensed as attorneys, title insurance companies, title insurance agents, or as real estate brokers. The proposal, applicable to transactions involving four or fewer residential units, also established settlement agent financial responsibility requirements, and it mandated disclosure to parties to real estate transactions that (i) they may choose their own settlement agent, and (ii) only licensed attorneys may give legal advice in connection with real estate transactions. The joint subcommittee agreed to continue studying these proposals.

C. JOINT SUBCOMMITTEE RECOMMENDATION

The joint subcommittee ultimately approved a motion recommending to the 1997 General Assembly that the HJR 210 study be continued during the 1997 interim. It recommended that the subcommittee's 1997 activities include further examination of the coalition's proposal; an analysis of controlled business relationships among title insurers, realtors and lenders; and continued discussion concerning general public protection in real estate settlements.

D. 1997 SESSION ACTIVITY

Two measures concerning real estate settlements were introduced in the 1997 General Assembly Session. The first, a resolution introduced by Delegate Barlow (HJR 584) continuing the HJR 210 real estate settlement market study, was not approved. The second, introduced by Senator Barry as SB 1104 and containing the coalition's CRESPA proposal, was approved by the 1997 Session.

CRESPA, as enacted, embodied much of the coalition's proposal detailed above. However, it also required all settlement agents to register with the Virginia State Bar and to comply with bar-promulgated guidelines concerning the unauthorized practice of law in real estate closings. The bill directed the bar to develop these guidelines in consultation with the Virginia State Corporation Commission (the regulator of title insurers and their agents) and the Virginia Real Estate Board, which regulates realtors.