Who really regulates attorneys in Illinois?
The Supreme Court? The ARDC? The IDFPR? Perhaps Illinois Lawyers Should Be Afraid . . . Very Afraid
In April, 2017, the Illinois Department of Financial and Professional Regulation (“IDFPR”) initiated prosecutions of two Illinois attorneys for alleged violation of the Real Estate Appraisal Licensing Act of 2002 (225 ILCS 458/Art. 1) (the “Appraisal Act”). The two attorneys were engaged in representation of clients and were attempting to obtain reductions in the assessed value of certain real estate parcels. In the same manner that they have proceeded in dozens of prior cases in their practices, and in the same manner that hundreds of other Illinois attorneys have proceeded and continue to proceed in similar cases, they submitted briefs in support of their positions setting forth legal arguments on the basis of relevant information, much of it publicly available, urging reductions.
The IDFPR prosecutions claim that the attorneys were engaged in the unlicensed practice of real estate appraisal and seek “cease and desist” orders against the attorneys, as well as civil penalties of up to $25,000 per violation.
Far from purporting to act as appraisers, or engaging in the development of appraisals, however, the attorneys were engaging in the practice of law. It is not likely anyone was fooled into thinking they were appraisers. They were representing their clients. Yet the prosecutions continue.
Should you be afraid? Totally.
Regulation of the Practice of Law
The regulation of the practice of law in Illinois, and its definition, are the exclusive province of the Judicial Branch of Government, specifically, the Illinois Supreme Court. Chicago Bar Ass’n v. Goodman, 366 Ill. 346, 349, 8 N.E.2d 941 (1937); King v. First Capital Financial Services Corporation, 215 Ill.2d 1, 828 N.E.2d 1155 (2005).
Following the inception of the prosecutions of Illinois attorneys, the Illinois State Bar Association, Chicago Bar Association, and the Illinois Real Estate Lawyers Association communicated to IDFPR representatives their concerns about the apparent impropriety of the decision to prosecute the attorneys in the manner it chose, but the IDFPR was not dissuaded, and the prosecutions continued. The IDFPR was not persuaded by the observation that, since the attorneys selected for prosecution were engaged in the practice of law and were representing clients in the tax assessment matters, a more appropriate mechanism might be the filing of appropriate complaints with the Illinois Attorney Registration and Disciplinary Commission. If there were really a risk of harm to the public, or if the IDFPR were concerned that the actions of the selected attorneys were bringing the profession into disrepute in some manner, filing complaints with the ARDC would be more appropriate.
“That would take too long,” came the response. The prosecutions continued.
On July 11, 2017, the Illinois State Bar Association filed a complaint in the Chancery Division of the Cook County Circuit Court against the Illinois Department of Financial and Professional Regulation (“IDFPR”), Bryan A. Schneider, in his official capacity as Secretary of IDFPR, and Kreg T. Allison, in his official capacity as Director of the Division of Real Estate of IDFPR, seeking injunctive and declaratory relief (2017CH09418). The ISBA action is not limited to the two proceedings involving the real estate tax attorneys, but more broadly seeks a judicial declaration that the province of defining and regulating the practice of law in Illinois is that of the Illinois Supreme Court, and that the IDFPR lacks the authority to prosecute, discipline or sanction lawyers for engaging in conduct, like the challenged activities in the two prosecutions, that entails legal representation of clients and not the development or rendering of an appraisal.
The Illinois Real Estate Lawyers Association (IRELA) shares the concerns of the ISBA, and stands ready to take whatever steps are needed to assist the ISBA in protecting Illinois real estate practitioners from what it sees as an overreach in prosecutorial activity beyond the scope of IDFPR’s authority. Again, under the Illinois Constitution, regulation and discipline of attorneys is the exclusive province of the Judicial Branch, specifically the Illinois Supreme Court—not the Executive Branch or an agency thereof.
To its credit, the IDFPR agreed to a moratorium on its prosecutions of Illinois attorneys in this area pending resolution of the ISBA v. IDFPR action, obviating temporarily the necessity of the ISBA seeking any temporary restraining order or injunctive relief in the pending prosecutions.
Said moratorium notwithstanding, the ISBA and IRELA remain concerned about the IDFPR’s claim that it has proper authority to prosecute attorneys in these circumstances. At its core, the allegation that an attorney who is seeking a reduction in assessed value of a parcel of real estate is violating the Appraisal Act is an allegation that the attorney is offering an opinion on the value of the real estate in the manner in which licensed appraisers offer such opinions. In fact, however, the attorneys who engage in this area of practice are offering legal arguments to support a different assessed value, and simply bring to bear information, much of which is publicly available, to support their positions. To claim that such activity, which goes on in thousands of proceedings throughout the state, constitutes the practice of “appraisal” is to misconstrue the nature of the professional activity.
The logic of the IDFPR, carried only slightly further, would result in prosecutions of Illinois attorneys engaged in estate planning, or engaged in typical real estate transactional work, where a component of the analysis and representation requires awareness of the value of real estate parcels. Acknowledgment of such real property values may be necessary for proper representation in these areas, but such acknowledgment does not involve acting as an appraiser, nor does it constitute the rendering of an appraisal.
The potential scope of the IDFPR prosecutions is indeed troubling. Thousands of Illinois attorneys are potentially at risk of being blindsided. The chilling effect on the practice of law in any area touching upon or incorporating an awareness of real estate values is significant. The resulting windfall to appraisers of having an appraisal required in every proceeding seeking a reduction in assessed value of a parcel of real estate, no matter how small, might be welcomed by appraisers, but the cost to the public of having to incur this expense cannot be justified on the basis of avoiding harm to the public, which is the touchstone of the Appraisal Act’s licensing requirements. It would hamper the ability of members of the public to obtain effective legal representation in the area of real property tax issues. Far from protecting the public from harm, the IDFPR’s actions would make it more difficult, and in some cases impossible, for members of the public to obtain needed relief.
The complaints summarizing the charges against the selected attorneys give extremely short shrift to the issue of harm to the public. Did any client of the attorneys selected for prosecution hire his or her attorney really thinking the individual being hired was an appraiser, and then suffer damages as a consequence? It is more likely that each client was fully aware that the individual he or she hired was an attorney who would be engaged in the practice of law on their behalf.
While it is a given that attorneys representing clients in tax assessment reduction matters cannot act as appraisers without proper licensing, it is likely that only the IDFPR thinks the two attorneys selected for prosecution were acting as appraisers. The attorneys were acting as attorneys, representing their clients. Moreover, in the opinion of this writer, even if the two attorneys selected for prosecution had labeled the appendices to their briefs in large, all-cap letters as “APPRAISAL,” this would not demonstrate that any client was fooled somehow into hiring an attorney when they really intended to hire an appraiser, or that they received gratuitous legal representation in connection with their real estate tax assessment matter when they had thought they were just paying for a written appraisal.
The reasoning employed by the IDFPR seems to “beg the question” (in the traditional logical fallacy sense). The IDFPR seems to be arguing something along the following lines:
1. Real Estate Tax Assessment reduction matters (and associated attorney representation) involve consideration of the value of a parcel of real estate;
2. Appraisers develop written appraisals that discuss the value of a parcel of real estate;
3. An attorney who comments on the value of a parcel of real estate in the context of legal representation of a client in a real estate assessment matter must be engaging in the unlicensed practice of appraisal.
As President of a state-wide bar association of Illinois real estate practitioners with thousands of attorney members (IRELA -- www.irela.org), I worry that the prosecutorial possibilities of the IDFPR approach are limitless. If not curtailed now, where will it stop? In addition to the risk of prosecution for unlicensed practice of appraisal, what about other areas?
Suppose, for example, that one of IRELA’s members, in the context of representing a client in a real estate sales transaction, were to happen to comment on a statement in a report from a licensed professional home inspector that the kitchen outlets in the subject 75-year-old residence need to be replaced with new GFCI outlets. Suppose the IRELA member attorney were to opine that the inspector’s statement perhaps should be “taken with a grain of salt” (because current building code requirements for new construction may not automatically dictate that this type of upgrade of an existing, older residence be undertaken). Has that attorney now offered an opinion regarding an issue relating to a residential home inspection issue that makes the attorney subject to IDFPR prosecution for the unlicensed practice of home inspection?
Where Do We Go From Here?
Because the possible permutations of the IDFPR approach in these prosecutions extend to almost any area of legal work where the value of real estate is involved in any way, the ISBA has opted to seek a Declaratory Judgment, Injunctive relief, and a Writ of Prohibition. The IDFPR has suggested that the ISBA action is inappropriate, and that each attorney should simply defend the individual prosecution, exhaust administrative remedies, and then seek to appeal if he or she is unhappy with the final result. It makes no sense, however, to have Illinois attorneys be at risk of this type of improper prosecution. Why become embroiled in an endless game of “whack-a-mole” trying to exhaust administrative remedies in a parade of individual prosecutions? Better to address the jurisdictional problem head on.
Since the definition of what constitutes the practice of law, and its regulation, are the exclusive province of the Illinois Supreme Court, the IDFPR may have overstepped its bounds. The argument that the IDFPR has advanced in the prosecutions that it is entitled to define the practice of law to the extent necessary to discharge its regulatory responsibility to enforce the Appraisal Act’s licensing requirements proves too much, and must be rejected.
If allowed to proceed, the proffered exception to the rule would swallow the entire rule. This dangerous approach must be curtailed. IRELA will continue to monitor these actions and take appropriate action to protect the interests of Illinois consumers and of Illinois real estate practitioners.
IRELA continues to remind consumers of the importance and value of having an independent attorney representing their interests in a real estate transaction, and works to protect consumers from the effects of the unauthorized practice of law in the real estate area.