After the sudden announcement last Friday, February 4, 2022, Virginia REALTORS® immediately engaged with the Bureau of Insurance (BOI) at the State Corporation Commission (SCC) to seek answers to the many questions raised by you and your colleagues regarding the BOI’s advisory opinion.
In addition to communicating with the BOI, our Government Relations team moved swiftly to request special legislation in the General Assembly to clarify a seller’s right to representation in the settlement process.
Here are a few points to be aware of at this time:
- The BOI is the regulatory agency for title settlement companies. They do not regulate attorneys who are in private practice but may have oversight of an attorney that works for a title company without having a separate law office.
- The Virginia State Bar, which governs attorneys, has indicated that it plans to post FAQs after having its Standing Committee on Legal Ethics review them at its March 24 meeting. The FAQs will be posted on the Real Estate Settlement Agents web page.
- There is only one settlement agent as defined in the law. From the BOI Letter: “The plain language of the Code recognizes that a single – not two or more – settlement agent be responsible for and oversee the settlement services required for a lawful settlement. This means that the settlement agent, designated by the buyer and identified on the closing statement per §55.1-1000 of the Code, is responsible for all escrow, closing, or settlement services associated with the transaction, and for compliance with the Code and the Commission’s Rules Governing Settlement Agents, 14 VAC 5-395-10 et seq.”
- Just like there is only one settlement agent, there is only one settlement – not a buyer side settlement and a seller side settlement. While many in the industry have defaulted to using these terms, there are not “sides” in a settlement.
- Regulations covering settlements and settlement agents prohibit charging duplicative or padded fees for escrow, closing, or settlement services.
- Either or both parties can be represented by legal counsel that is independent of the settlement agent. Such attorney must be retained to represent the buyer or seller through a law firm.
- To ensure that this is clear in the law, Virginia REALTORS® has requested legislation, House Bill 1364, stating that the seller can hire a licensed attorney to represent their interests in a closing, and spelling out what that representation could look like. Because this bill is being introduced after the deadline to submit legislation, it required the unanimous consent of the House of Delegates for it to be introduced. This means all 100 members of the House had to agree to the late introduction of the bill. That consent was given on Wednesday, February 9, and the bill is being carried by Delegate Jay Leftwich, Chair of the General Laws committee. HB 1364 has already received strong bipartisan support when it passed out of the General Laws Committee on a 22-0 vote the day after it was introduced.
- What our bill does: Makes it clear that a seller can have legal representation in a real estate transaction
- What our bill does not do: Address either split settlements (where funds are divided between two settlement agents) or change the definitions of a settlement agent or escrow, closing, or settlementservices. HB 1364 is not attempting to change current law for split settlements or allow for split disbursements. Changing those aspects of the transaction would require a much more thoughtful discussion with input from our members. HB 1364 is simply clarifying that a seller can hire a lawyer to represent their interests, which is not a matter of disagreement among our members.
Virginia REALTORS® will continue to provide updates on the situation as things progress.