Legal Competence and Ethics in the Digital eClosing Age

Lawyers are not commonly thought of as innovators or techies. However, technology is a big motivator for the next generation of clients and, because of that, it’s changing the way lawyers everywhere do business. According to a Nielsen survey, millennials cited technology as the most defining characteristic of their generation.

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Many buyers and sellers today prefer to be in the driver’s seat when buying and selling a home – and websites like Zillow, Trulia and Realtor.com are making it easier than ever. Technology partnered with today’s digital marketplace is also increasing the expectation and demand for closing real estate transactions electronically – and we must keep up the pace. The future is here, and it is time for us lawyers to become more technologically savvy.

Requiring new competencies for lawyers

Technology may, by virtue of its existence, create its own ethical duty for lawyers. In the digital closing age, what does it mean for a lawyer to be competent in technology? The American Bar Association amendment and comment to Model Rule 1.1, which sets out a lawyer’s ethical duty of competence, states as follows:

Maintaining Competence

[8] To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject.

Lawyers in more than 25 states now have an ethical duty of technology competence thanks to rules passed in those states. Other states have adopted Model Rule 1.1 (in part), which does not specifically mention technology when it states, “lawyer(s) shall provide competent representation to a client.” However, just because technology isn’t explicitly mentioned, do not assume that it doesn’t apply.

Competence requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. In this day and age, to competently deliver legal services, lawyers must keep up to date with legal technology that (1) expands access; (2) improves and grows the practice of law; (3) increases efficiency in the delivery of legal services; (4) and ensures better skilled lawyers. Thus, as lawyers, we have a duty to be competent not only in the law and its practice, but also in technology, which assists us in the protection and delivery of legal services to our customers.

Incorporating cutting-edge technology into everyday practice  

An article entitled “A Golden Age in Legal Tech Start-Ups” by Robert J. Ambrogi, in the ABA’s Law Practice Technology issue, focuses on innovation in legal technology. Machine learning, natural language processing and other artificial intelligence technologies have already began to transform commercial real estate transactions. Many commercial law firms are more often using artificial intelligence in title review, portfolio review, regulatory compliance, deal vetting, contract review, and entity and legal review for document-intensive real estate transactions.

eClosing technology also has the power to improve access and accessibility to lawyers and legal services, especially for those with disabilities. Technology is now available for electronic signatures, and it has built-in capabilities with advanced authentication levels to detect accuracy of signatures.

Improving the customer experience

Tools such as video conferencing provide high levels of engagement, allowing closing lawyers to digitally send documents to the customer and walk them through each step of the transaction – unlike today’s mail-away closings. While closing lawyers today may not be able to do a fully electronic eClosings (i.e., where all loan, title, settlement and closing documents are signed, notarized and recorded electronically), they can start to deliver transactions electronically using a hybrid process where key loan documents, such as the note and the security instrument, are wet signed and notarized on paper.

eSignature technology increases efficiency in the delivery of legal services by enabling (1) faster turnaround allowing the buyer and seller to spend less time at the closing table; (2) fewer errors with no more need to contact clients due to missed signatures; and (3) time savings in faster delivery, allowing customers to independently review documents before coming to the closing table.

Providing value beyond the closing table

The closing table is only one area in which technology can assist lawyers. For documents that have left the closing table, many states have enacted some form of the Uniform Real Property Electronic Recording Act (URPERA), which authorizes a recorder to accept electronic documents for recording, indexing and storing, including recordation of instruments affecting real estate. Currently, eRecording is used in 30% of recording jurisdictions and many states are phasing in programs for real estate recording.

If your law firm is not focused on cybersecurity or transactional document and practice management systems like eBilling, you may not be servicing your clients skillfully and there may be ethical implications as well. As lawyers, we need to be advocates for expanding these programs – both as part of a business strategy and our ethical obligation to promote reform and cultivate knowledge of the law beyond its use for our customers.

Striving to become a forward thinking, tech-savvy industry

Working together, title insurance underwriters and closing attorneys are responsible for ensuring a complete eClosing solution becomes reality. Those who adjust and successfully implement electronic processes will lead the way in improving the law and the quality of services rendered by the legal profession.

Our local underwriters are well versed in the laws and legal implications of each individual state as related to eSignature and eNotarization. They will be able to walk you through the title insurance requirements to insure digital transactions and we will be there to help vet technology vendors – ensuring high levels of security and technical compliance with industry best-practice standards.

Get more in-depth information on eClosing in “From Hybrid to E-Closing: Moving the Title & Settlement Industry toward a Paperless Real Estate Closing.”

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