The Practice of Law -- Do You Know Your Limits as a Real Estate Agent?
A client asks, “Can you write this contract so I can lease-to-own?” “Is the other party to this contract in breach?”
Know Your Limits-Because real estate agents work with contracts that define a person's legal rights and obligations, it is important to know your limits if you are not a licensed attorney. It is also important to recognize when the best thing you can do for your client is to recommend that they seek private legal counsel. The practice of law is defined by Section 81.101 of the Texas Government Code and includes giving advice or rendering any service that requires the use of legal skill or knowledge, such as preparing a contract. Section 1101.654(c) of The Real Estate License Act creates an exception for real estate license holders who complete contracts using a form prepared by an attorney, prepared by a property owner, or adopted by the Texas Real Estate Commission.
Just the FactsA real estate agent should not draft a legal document that affects real property nor should a real estate agent write more than a factual statement or business detail in the special provisions of a contract. If a client asks you to insert a provision that cannot be easily understood or may be subject to interpretation, then you should advise the client to seek an attorney who can draft the provision for them. For example, a provision intended to create a lease-to-own transaction should be drafted by an attorney
Point out the obvious but no interpretationA real estate agent may not give advice or an opinion as to the legal effect of a contract. When a client asks, "Is the other party to this contract in breach?" a license holder can only point out a relevant provision that may apply to the situation. If the client has a question regarding the interpretation of the provision, then you should advise them to seek private legal counsel. When there is an unusual matter involved in a transaction, a real estate agent must advise the client to consult an attorney before a contract is executed
PenaltiesThe unauthorized practice of law by a real estate agent may result in revocation or suspension of your real estate license and an administrative penalty as the result of an investigation by the Standards & Enforcement Services Division of the Texas Real Estate Commission. You may also find yourself a party to a lawsuit initiated by the Texas Unauthorized Practice of Law Committee. For more information regarding the unauthorized practice of law and the use of standard contract forms, see Section 1101.654 of The Real Estate License Act (unauthorized practice of law) and Section 537.11 of the Rules of the Texas Real Estate Commission (use of standard contract forms).