Effective October 1, 2019 only Connecticut licensed attorneys can conduct real estate closings in the state for certain mortgage loan transactions.
Real Estate Closings
The process of closing a loan generally involves four core functions:
- transferring title to the buyer;
- transmitting payment to the seller (usually through an escrow agent);
- discharging any outstanding liens on the property; and
- creating a lien on the property in favor of the buyer’s lender.
In a mortgage transaction, the “closing agent” is the person responsible for coordinating the activities of various parties involved in the transaction. Several states – whether by case law or bar opinion – hold that it is the unauthorized practice of law for someone other than a duly licensed attorney in the relevant jurisdiction to conduct real estate closings.
Impact of New Connecticut Law
Historically, no explicit authority has held that only an attorney may act as a closing agent in Connecticut. However, as a general matter, almost all loans in Connecticut are closed by an attorney. Connecticut Senate Bill 320 (Public Act No. 19-88) has codified that long-standing practice. As a result, as of October 1, 2019, only a duly licensed Connecticut attorney in good standing may conduct real estate closings.
The measure defines “real estate closing” as a closing for:
- a mortgage loan transaction, other than a home equity line of credit transaction or any other loan transaction that does not involve the issuance of a lender’s or mortgagee’s policy of title insurance in connection with such transaction, to be secured by real property in Connecticut, or
- any transaction wherein consideration is paid by a party to such transaction to effectuate a change in the ownership of real property in Connecticut.
A violation of the new requirement constitutes a Class D felony, punishable by a $5,000 penalty or five years in jail.
Lenders should ensure that only a Connecticut licensed attorney conducts the closing on any first- or second lien mortgage loan, other than a home equity line of credit, that require the issuance of title insurance.