Archive for August, 2011

13
Aug
11

Closing Attorney benefits again with attorney-client disclaimer

 

In nearly all closings involving an institutional lender, the attorney closing the transaction is an attorney for the lender, even though the fees may be paid by the buyer or the seller of the property.  A number of claims are brought against the closing attorney by a disappointed buyer or seller.  The primary obstacle is to get past the privity issue.  This is usually done by claiming reasonable reliance, either in the form of a voluntary agency theory (the attorney promised but failed to do something for the benefit of the claimant) or claiming confusion about who the attorney represented due to claimed statements by the attorney.  Several cases have found fact issues for a jury in such circumstances. 

Disclose, disclaim, avoid liability

The best way to avoid such fact issues is to include a solid attorney-client disclosure statement in the closing documents.  A recent Court of Appeals case provided further confirmation of this advice.

In Howard v. Sellers & Warren, P.C. 309 Ga. App. 302, 709 S.E.2d 585 (2011), a seller of real estate in a complicated financing scheme involving multiple closings sued one of the closing attorneys.  The seller claimed that he relied upon the attorney to fill in blanks on the closing documents which were improperly completed.  The Court affirmed summary judgment on a number of issues, including the absence of the attorney-client relationship.  The Court relied heavily upon a detailed, specific disclosure statement:

The undersigned parties acknowledge that this transaction has been closed by the Closing Attorney and that the Closing Attorney was designated to close this transaction by and on behalf of the Lender. Closing Attorney accordingly represented the Lender in this transaction. Closing Attorney did not represent Purchaser/Borrower or any other party (other than Lender) in connection with this transaction. The undersigned finally acknowledge that they did not receive or rely upon any advice from Closing Attorney regarding this transaction.

The seller argued that duties were created by the statements of the closing attorney in spite of the disclaimer.  The Court rejected this argument, relying on Williams v. Fortson, Bentley & Griffin, 212 Ga. App. 222, 223-224, 441 SE2d 686 (1994).

The lesson here is one this site has already advocated.  Any attorney that closes loans, especially loans in which the closing attorney is the only attorney in the room at closing, needs to include similar disclosures/disclaimers that clearly state that the attorney is representing the lender only, that the buyer and seller may have their own attorney, and that nothing the attorney does or says is being relied upon by the seller and buyer.  The failure to have such a disclaimer greatly increases the chance of losing a summary judgment motion in a claim brought by a non-client.

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06
Aug
11

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