de Beaubien Knight Simmons Mantzaris & Neal llp

Avoiding the Unauthorized Practice of Law

“Live one day at a time emphasizing ethics rather than rules.”

- Wayne Dyer-

A common concern amongst practicing attorneys when utilizing paralegals is the risk of partaking in the unauthorized practice of law.  There are many tasks that an attorney may delegate to the paralegal in order to free himself up so that he may complete other responsibilities. Passing on certain assignments to the paralegal helps the attorney become more efficient and provides economic relief to the client. Both the attorney and paralegal must be aware of which assignments should and should not be delegated, in order to assure that they do not cross the line and engage in the unauthorized practice of law.

Restrictions on who can and cannot practice law go as far back as the colonial era.  The first statutes that dealt with the unauthorized practice of law in the United States were established in the 1850s and were adopted by several states.  Later, during the Depression, the majority of the limitations that we have today were imposed.  This was at a time when attorneys needed to protect their economic interests from any and all competition.  Even though the unmet need for legal services is well documented, attorneys have through time consistently opposed giving up their traditional functions.  There are obvious reasons for their stance including concerns as to the quality of legal services that someone who is not trained and licensed as an attorney may provide.  In Florida, the current operative statute proscribing and penalizing the unauthorized practice of law is Florida Statute § 454.23 (2012).

To date, there is no definitive list of tasks that captures the meaning of practicing law.  The concept is flexible and as it changes over time with many varying factors; such as: economics, complexity of laws, political and professional activity, and consumerism to name a few.  The ABA Model Code states as follows: “It is neither necessary nor desirable to attempt the formulation of a single, specific definition of what constitutes the practice of law.”  However, there are many court decisions and have set a series of tests to determine what defines the practice of law.  In The Florida Bar v. Neiman, 816 So.2d 587, 594 (Fla. 2002), the Court provided examples of the practice of law:

acts commonly understood to be the practice of law, such as: holding himself out as an attorney in dealings with others; attempting to argue and advocate the merits of cases, the applicability of the law, evidentiary issues, liability issues, discovery matters, and settlement matters with opposing counsel; and attempting to analyze statutory and case law and to discuss it with clients and opposing counsel.

Also, may statutes and court rules set forth the definition of the practice of law.  Rules that bar the unauthorized practice of law affect lawyers and nonlawyers similarly.  For example, pursuant to Florida Statute § 454.31 an attorney engages in the unauthorized practice of law when they practice while they are suspended or practice after they have been disbarred.

It is the lawyer’s duty to avoid the unauthorized practice of law.  When utilizing a paralegal, an attorney must be aware of the rules and regulations governing the unauthorized practice of law in order to prevent delegating tasks to the paralegal that fall under the practice of law.  Any nonlawyer engages in the unauthorized practice of law when they preform services for the client that are considered the practice of law.  Rule 4-5.3, Rules Regulating The Florida Bar, requires lawyers to be responsible for the training and management of paralegals as well as the proper delegation of tasks to paralegals.

One of the more obvious lawyering functions that is universally considered to be an exclusive attorney role and should not be delegated to a paralegal is representing a client in court proceedings.  The basis for barring a nonlawyer from representing clients during court proceedings extends to another facet of litigation, the taking of depositions.  The lawyer’s function in in representing a client being deposed consists of making objections to questions on evidentiary grounds and also preserving those objections for the record.  When an attorney is deposing a party or a witness he is carrying out a task which is comparable to that of direct examination in a trial and consequently, must be familiar with all of the intricate rules of evidence.  In fact, the First District Court of Appeal has held “that the taking of a deposition constitutes the practice of law under section 454.23, Florida Statutes.” State v. Foster, 674 So.2d 747, 749 (Fla. 1st DCA 1996).

The most involved category of conduct that constitutes the practice of law is giving legal advice.   Similar to appearing on behalf of client in court, framing a substantive legal opinion to direct a client’s conduct is another primary attorney role that cannot be passed on to the paralegal.  In litigation, most paralegals have regular communication with clients, which causes possibilities for the paralegal to give legal advice.  To avoid giving legal advice and refraining from committing the unauthorized practice of law, the paralegal must first consult with the supervising attorney before relaying any of the attorney’s advice to the client.  The paralegal should only communicate the direct and exact advice of the attorney without any expansion, interpretation or analysis.  The paralegal with the consent of the attorney can express the attorney’s legal advice to the client so long as the paralegal is not framing and giving their own legal advice.

The final core category of functions that is reserved solely for the attorney is creating the attorney-client relationship and determining the fees to be charged for the legal services to be provided.  A paralegal shall never make the independent decision on whether or not to represent a potential client.  While the paralegal may be utilized to draft retainer agreements and convey certain information to the client regarding fees, this information should all come directly from the attorney.  An attorney must maintain a direct relationship with all clients and must use independent professional judgment.

While attorneys must be mindful of the foregoing, there are many benefits to utilizing a paralegal in law practices.  Paralegals allow the attorney to be more efficient which leads to the attorney being more effective.  So if utilization of paralegals is a part of an attorney’s practice, then (s)he should continue to use paralegals. The attorney must be aware of the current caselaw, Rules Regulating The Florida Bar, Florida Statutes, and Florida Bar Ethics Opinions as they relate to the unauthorized practice of law as they would with any other legal issue.

By Bart Valdes, Esq., Amber Ashton, Esq., and Ashley Hughes, Esq.

            As Florida continues to sift through debris left in the wake of the foreclosure crisis there are some issues that remain even after a property is sold at a foreclosure sale.  Both homeowners’ and condominium associations, as well as local governments, often end up with liens that need to be dealt with after a foreclosure action.  The ability to resolve these issues promptly and fairly is important to all parties involved.

In Florida, the Homeowners’ Association (“HOA”), §720.3085, Florida Statutes, and Condominium Owners’ Association (“COA”), §718.116, Florida Statutes, lien laws operate in substantially the same manner.  In many instances, the liability of a first mortgagee (the “lender”) is limited, or completely extinguished, by the documents that govern the HOA or COA (often called the “declaration” or “covenants”).  Also, the HOA/COA’s right to collect from a first mortgagee may depend on when the mortgage was executed.  It is, therefore, critical to review the governing documents of the HOA/COA, as well as the applicable loan documents, to determine the rights of everyone involved.

There is also a statute that limits the liability of the first mortgagee (or its successors and assigns) in certain instances.  So long as the first mortgagee names the HOA/COA as a party in the underlying foreclosure action, the HOA/COA is limited in its ability to pursue assessments which accrued on the property prior to the conclusion of a successful foreclosure action.  In instances where the statute applies, the HOA/COA may only recover from the lender the lesser of:

(1)                          the unpaid assessments for the 12 month period immediately proceeding the mortgagee’s acquisition of title; OR[1]

(2)                          one percent (1%) of the original mortgage debt.

Importantly, the lender will be responsible for any and all assessments which come due after the recording of the Certificate of Title in favor of the lender.  As a general matter, the lender is responsible for paying the amount due for prior assessments to the COA within thirty (30) days of acquiring title or the property may be subject to a Claim of Lien for the assessments due.  In regard to HOA assessments, the assessments are due as provided in the individual HOA governing documents.  The HOA has to provide forty-five (45) days written notice to the owner prior to recording a lien for unpaid assessments.  Both the COA and HOA statutes provide for the payment of interest and attorneys’ fees for unpaid assessments after title is acquired.

In order to expedite this process, Florida law states that within fifteen (15) days of a written request from an owner or lender, or their designee, a HOA/COA must provide an “Estoppel Certificate” signed by an officer or authorized agent of the HOA/COA stating all assessments and other monies due to the HOA/COA.  The HOA/COA may charge a reasonable fee for the preparation of the Estoppel Certificate so long as the fee is provided for in the HOA/COA governing documents.  If the HOA/COA does not provide the Estoppel Certificate then there is an expedited suit that can be filed, or a post-judgment motion may be pursued, to determine the amount of assessments due and assist in clearing title.

The other most common type of lien that arises out of a foreclosure action is a code enforcement lien.  Code enforcement violations generally occur simultaneously with a lender’s foreclosure efforts due to either the abandonment of the property by the owner/investor, the neglect of the tenant or occupant while a property is in foreclosure, or active attempts by the owner to impair the property value.

When a code enforcement lien is discovered, it is important to first check to see when the Notice of Lis Pendens was recorded. The recording of the Notice of Lis Pendens in the foreclosure suit operates to protect the lender’s interest in the property from any impairment from intervening liens, including code enforcement liens.  Medical Facilities Development, Inc. v. Little Arch Creek Properties, Inc., 675 So. 2d 915 (Fla. 1996); Chiusolo v. Kennedy, 614 So. 2d 491 (Fla. 1993).  Under most circumstances, the recording of the Notice of Lis Pendens also constitutes a bar to the enforcement against the property of the code enforcement liens.  §48.23(1)(d), Fla. Stat. (2009).  Further, as a general rule, once the property is sold at a judicial sale, the property is forever discharged from the alleged liens.  Op. Att’y Gen. Fla. 93-77 (1993).  As such, there may be certain legal defenses to code enforcement liens that are available to those who end up with a property after a foreclosure sale.

Most cities and counties also have “amnesty” programs available to provide a fine or lien reduction even if the legal defenses above are not present.  Usually, the county or city will require the new owner to take the corrective action required by the code enforcement department before the lien is reduced or eliminated.  Every case needs to be evaluated independently as there are many variables that impact the decision making on how to deal with these liens.  Either way, it is important to have competent legal counsel to assist in promptly resolving these issues in order to clear title and preserve the value of the property.

By Bart R. Valdes, Esq., and P. Hayden Haskins, Esq.

Florida is at or near the top of the charts in regard to the number of foreclosure filings, the number of properties sold at foreclosure sales and the total number of distressed properties.  As the foreclosure process shakes out, many homeowners have decided to “walk away” and simply allow the house to be taken back by the bank.  Many lenders have, at this time, decided to simply get the property back without pursuing collection efforts.  There are, however, other rights that the lender retains to collect the full amount that is due even after the property is sold at a foreclosure sale.

In Florida, a lender may seek a deficiency judgment if the foreclosure sale bid price does not equal or exceed the amount owed under the judgment of foreclosure.  Warehouses of Florida, Inc. v. Hensch, 671 So. 2d 885 (Fla. 5th DCA 1996); Provident National Bank v. Thunderbird Associates, 364 So.2d 790 (Fla. 1st DCA 1978); Patron v. American National Bank of Jacksonville, 382 So.2d 156 (Fla. 5th DCA 1980).  Generally, the measure of the amount of deficiency to which the lender is entitled is the difference between the amount of the foreclosure judgment and the fair market value of the property on the date of the judicial sale.  Hatton v. Barnett Bank of Palm Beach County, 550 So.2d 65 (Fla. 2^nd DCA 1989); Fara Mfg. Co., Inc. v. First Federal Sav. and Loan Ass’n of Miami, 366 So.2d 164 (Fla. 3rd DCA 1979); Norwest Bank Owatonna, N.A. v. Millard, 522 So.2d 546 (Fla. 4th DCA 1988).

This means that unless a third party buys the property at the foreclosure sale for the full amount of the mortgage debt at the time of the judgment, then the borrower is still liable for a money judgment (called a “deficiency judgment”).  In today’s market where almost all of the properties sold at a foreclosure sale are “under water,” the lender ends up owning the property and there remains a debt.  The lender, therefore, retains the right to get a judgment and try to collect this debt unless the lender and borrower reach some kind of alternative agreement.  As a result, a borrower is potentially liable for a debt of hundreds of thousands of dollars after the foreclosure sale.

The deficiency judgment may be sought in the foreclosure action or in a separate action.  §702.06, Fla. Stat. (2012).  If the deficiency is sought in the foreclosure action, then the time for filing the requisite separate motion for deficiency depends on whether the final judgment reserves jurisdiction to enter a deficiency judgment.  If jurisdiction is not reserved, the motion must be filed within 10 days of the issuance of the certificate of title.  Frumkes v. Mortgage Guaranty Corp., 173 So. 2d 738 (Fla. 3d DCA 1965); Katz v. Kolish, 142 So. 2d 759 (Fla. 3d DCA 1962).  If jurisdiction is reserved (which is typical), then the motion must be filed within one year after the judicial sale and issuance of the certificate of title, or else the action will be subject to dismissal for lack of prosecution under Rule 1.420(e), Florida Rules of Civil Procedure.  Frohman v. Bar-Or, 660 So.2d 633 (Fla. 1995).  If no deficiency is sought or otherwise adjudicated in the foreclosure action, then a separate action may be filed within five years to recover the deficiency.  §702.06, Fla. Stat. (2012); §95.11, Fla. Stat. (2012); Chrestensen v. Eurogest, Inc., 906 So.2d 343 (Fla. 4th DCA 2005).  As such, the lender retains the right to come after the borrower for up to five years in certain circumstances.

The right to seek a deficiency judgment still exists even if the property was sold as part of a short sale (unless the lender and borrower agree in writing that the lender waives its right to seek a deficiency judgment).  A short sale in Florida can be completed by simply allowing the mortgage lien to be released while the obligation to pay under the note still remains with the borrower.  E. J. Sparks Enterprises v. Christman, 117 So. 388 (Fla. 1928) (holder may discard mortgage securing note and sue on note unless note or mortgage otherwise provides).  It is very important for both lenders and borrowers to know their rights and understand the costs, risks and burdens of reaching any agreement.

Litigation attorneys must possess certain characteristics to effectively represent their clients. These include, but are not limited to: honesty, a strong work ethic, intelligence, persistence, professionalism, creativity, level-headedness, and communication skills.

Click Briefs_October 2012_ParalegalPost to read the full article.