On June 1, 2010, the Wisconsin Supreme Court unanimously voted to adopt SCR Chapter 23 Regulation of Unauthorized Practice of Law. You may be sitting there thinking, “What does this have to do with me?” Frankly, it has everything to do with you.

Imagine waking up tomorrow in a world where a real estate licensee is no longer able to draft forms on behalf of customers or clients, a world where the court decided only those authorized to practice law in Wisconsin and/or the consumer would be able to draft a contract relative to a real estate transaction. If this event did occur, clearly your day, your career, your life would be very different. 

More than seven years ago, the State Bar of Wisconsin initiated a petition requesting the Supreme Court create a definition for both the lawful practice and unauthorized practice of law. Under the language of this original petition, the ability of the real estate licensee to draft forms on behalf of consumers would have vanished. The WRA had serious concern that if the original petition was granted, absent specific language, the rule had the potential to take away a great portion of the role of the real estate licensee in a real estate transaction.

This is not the first time the role of the real estate licensee has been challenged. In the early sixties, the Attorney General for Wisconsin brought action against what is known today as the Department of Regulation and Licensing (DRL) and the WRA, contesting the ability of real estate licensees to use forms incidental to their practice. By a narrow 4-3 decision, the Supreme Court confirmed the real estate licensee’s limited right to practice law in a real estate transaction. In State ex rel. Reynolds v. Dinger (1961) the Supreme Court held that when a licensee uses the state-approved forms to accomplish the intent of the consumer, it is the practice of law and provides a useful benefit to the public.

For almost 50 years, Dinger has afforded real estate licensees the right to draft state-approved forms on behalf of consumers. Over the last two decades, the State Bar collected complaints alleging the unauthorized practice of law in many different areas and industries such as: real estate, financial planning, medical powers of attorney, title companies, insurance and more; however, the State Bar does not have any authority over these matters. Therefore, the State Bar petitioned the Supreme Court to create a rule defining the unauthorized practice of law and the creation of a new enforcement process.

In recent months, the State Bar declared it was not looking to change the role of the real estate licensee in transactions. In a State Bar article published March 9, 2010, Tom Zilavy, chair of the State Bar’s Unauthorized Practice of Law (UPL) Policy Committee, stated, “The REALTORS^® seem to be concerned that what the State Bar is proposing would somehow have a negative impact on the holding in the ruling in the Dinger case,” Zilavy said. “The State Bar has no interest in disturbing Dinger. There is no intention to reverse or go backward on that ruling. I hope these comments give the REALTORS^® some feeling of solace that we are not trying to cause trouble for them in that area.” (Adam Korbitz, Supreme Court Unanimously Votes to Proceed With Draft UPL Rule, Rotunda Report, March 2010).

Even with this public assurance by the State Bar, the WRA was still extremely concerned about the outcome of the petition. Our main concern was the creation of a rule that limited the role of the licensee in a real estate transaction. The WRA acknowledged that if the court adopted SCR 23, certain language would need to be included allowing licensees to continue their practice. And on June 1, 2010, the court adopted a rule that incorporated the language supported by the WRA.

The adopted rule also rejected the State Bar’s request to create a third-party enforcement entity to penalize SCR 23 violations. Rather, the court left the enforcement to civil and criminal statutes Wis. Stat. §§ 100.18 and 757.30, respectively. In addition, the court established a five-year sunset provision, meaning the court will review the matter again in five years to address any needed modifications to the rule or possibly remove the rule altogether.

Real estate agents were not the only ones at risk had the State Bar’s proposed rule been passed. Other industries and professions were also watching this petition closely. For example, the court’s adopted rule also provided exclusions for other professions such as CPA’s, lobbyists and members of the insurance industry.

While the court voted to adopt SCR 23 on June 1, 2010, it withheld release of the rule in its final format. However, the court indicated an anticipated effective date of January 1, 2011. 

Once effective, the ability to draft real estate contracts on behalf of consumers will have the support of both Dinger and SCR 23, solidifying the real estate licensee’s role in the transaction. Now that’s a world to wake up to.
As of the date of this article’s publication, the court had not released the final version of the adopted rule. The most current version of SCR 23 is available at http://wicourts.gov/supreme/docs/0709upldraft.pdf.

Kevin King is the Executive VP of the REALTORS^® Association of South Central Wisconsin.

Cori Lamont is Director of Brokerage Regulation and Licensing for the WRA.