In March of this year, the Virginia Legislature approved a new bill which would require written consent from a represented seller’s counsel before a settlement agent or its subsidiaries, affiliates, or subcontractors [“Settlement Agent”] can collect any fees payable to the Settlement Agent from the seller. Effective July 1, 2023, the law regarding choice of Settlement Agents in Virginia will read as follows:

§ 55.1-1006. Choice of settlement agent. A purchaser or borrower in a transaction related to real estate in the Commonwealth shall have the right to select the settlement agent to provide escrow, closing, or settlement services in connection with the transaction. The seller in such a transaction may not require the use of a particular settlement agent as a condition of the sale of the property. Nothing in this chapter shall prohibit a seller from retaining an attorney licensed pursuant to Chapter 39 (§ 54.1-3900 et seq.) of Title 54.1 to represent his interests and provide legal advice pertaining to escrow, closing, or settlement services. Such representation may include deed preparation, fee negotiation, and review of applicable documents and advising the seller on any legal matters related to the settlement or closing process. The settlement agent may not collect any fees from a represented seller payable to the settlement agent or its subsidiaries, affiliates, or subcontractors without first obtaining the written consent of the seller's counsel. [Emphasis added].

This language closely mirrors the previous code, with the addition of the last sentence, which has been emphasized for the purposes of our article. In its entirety, it establishes that the buyer in a real estate transaction has the unfettered right to select the Settlement Agent who will be providing the escrow, closing, and settlement services for a particular transaction. This does not, however, prohibit the seller from retaining a licensed attorney (“Seller’s Counsel”) to represent the sellers’ interest and/or provide legal advice regarding escrow, closing, or settlement services. 

The added language further clarifies that where the seller opts to retain counsel, the buyer selected Settlement Agent cannot collect any fees from the seller, without the written consent of Seller’s Counsel. This revision follows an earlier legislative update to the Choice of Settlement Agent statute (“2022 Amendment”), which was a response to the Administrative Letter released by the Virginia Bureau of Insurance (“BOI”) on February, 4 2022 regarding split settlements. For a recap of BOI’s letter on split settlements check out the discussion facilitated by the Northern Virginia Association of Realtors’ (“NVAR”) Attorney Round Table featuring our founder and owner, Keith Barrett (see NVAR Split Settlement Panel | https://www.youtube.com/watch?v=htZtD5CPfw4). The 2022 Amendment explicitly clarified the seller’s right to retain counsel for guidance with legal and/or settlement matters, but resulted in uncertainty with respect to what fees the Settlement Agent could charge to represented sellers. This most recent update helps to answer some of those questions and minimize the risk of duplicative fees being imposed upon a represented seller. 

In the same manner that the implications of BOI’s letter and 2022 Amendment was handled primarily by title companies and did not impact the day to day of real estate agents in any substantial way, the implications and implementation of this new law will similarly fall on title companies and attorneys. As a reminder, § 55.1-1007 of the Virginia Code requires all contracts involving the purchase of real estate containing not more than four residential dwelling units to include a disclosure relating to the law on Choice of Settlement Agents in Virginia. Beginning July 1, 2023, this disclosure should read as follows, and include the italicized language show below:

Choice of Settlement Agent: Chapter 10 (§ 55.1-1000 et seq.) of Title 55.1 of the Code of Virginia provides that the purchaser or borrower has the right to select the settlement agent to handle the closing of this transaction. The settlement agent's role in closing this transaction involves the coordination of numerous administrative and clerical functions relating to the collection of documents and the collection and disbursement of funds required to carry out the terms of the contract between the parties. If part of the purchase price is financed, the lender for the purchaser will instruct the settlement agent as to the signing and recording of loan documents and the disbursement of loan proceeds. No settlement agent can provide legal advice to any party to the transaction except a settlement agent who is engaged in the private practice of law in Virginia and who has been retained or engaged by a party to the transaction for the purpose of providing legal services to that party. No settlement agent may collect any fees from a represented seller payable to the settlement agent or its subsidiaries, affiliates, or subcontractors without first obtaining the written consent of the seller's counsel. [Emphasis added]

No doubt the July 2023 updates to NVAR’s contract will contain this additional language so real estate agents using standard form agreements should ensure they are using the most updated version of NVAR’s forms.