Can a developer's lawyer who is also a title insurance agent keep part of the buyer's title premium as a fee?

Plain-English summary

A condominium developer used a form purchase agreement requiring the developer to deliver an owner's title insurance binder at closing (from Lawyers' Title Guaranty Fund or another reputable title insurer the developer chose) and requiring the purchaser to pay for it at the standard card rate. The developer's attorney, who would obtain the title insurance, asked whether he could retain as part or all of his legal fee for closing the transaction part of the premium the purchaser paid. Because the minimum risk rate the Insurance Commissioner requires (Section 4-21.03 of the Administrative Code) exceeds the amount the agent must remit to the insurer, attorneys who act as agents commonly retain that difference as part of their fee.

The committee viewed the purchase-agreement provision shifting the title insurance cost to the purchaser as a negotiable term and, if not prohibited by statute, found no impropriety in it, noting the purchaser need not agree to it initially. Citing Opinions 65-58 and 69-39, it found no impropriety in arrangements shifting a seller's or lender's attorney's fees to a purchaser or borrower, while recalling that Opinion 69-39 required the mortgage company's attorney to make clear he was attorney for the mortgage company. The remaining question was whether disclosure of the title insurance arrangement is required, and the committee concluded it is, even though the purchaser pays the same amount regardless of where the premium goes. The attorney for the developer may retain the part of the premium he keeps as agent, provided that fact is disclosed to the purchaser, and the committee said the disclosure should be made at a time and in a manner that gives the purchaser a choice, not at closing after the agreement has been signed and the insurance obtained.

Currency note

This opinion was issued in 1975, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. It applied the former Code of Professional Responsibility, which has since been replaced. Treat this page as historical context, not current guidance. Verify against current Rules 4-1.8 and 4-1.5 before relying on any specific requirement mentioned here.

Common questions

Q: Can a developer's lawyer who is also a title agent keep part of the buyer's title premium?

A: The opinion concluded he may retain that portion as part of his fee, provided full disclosure is made to the purchaser.

Q: When must the disclosure be made?

A: Per the opinion, at a time and in a manner that gives the purchaser a choice, not at the closing after the purchase agreement is signed and the title insurance already obtained.

Q: Does it matter that the buyer pays the same amount either way?

A: The committee said disclosure is still required even though the purchaser pays the same premium regardless of where it goes.

Background and rules framework

The opinion addressed a lawyer retaining a share of a third-party premium as part of his fee, with disclosure to the affected purchaser. That subject corresponds to Model Rule 1.8 (a lawyer's business dealings and interests adverse to those affected by the representation) and Model Rule 1.5 (fees); the current Florida counterparts are Rules 4-1.8 and 4-1.5.

Citations and references

Rules and regulations cited:

• Fla. Admin. Code § 4-21.03 (minimum title insurance risk rate)

Other opinions cited:

• Florida Bar Opinions 65-58; 69-39; 73-1; 74-50

See also

• FL Bar Ethics Op. 75-40: Title Company Fee to Lawyer
• FL Bar Ethics Op. 75-27: Examining Title Work for a Fee

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-75-6/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-75-6-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 75-6
June 25, 1975
Advisory ethics opinions are not binding.
An attorney who represents a condominium developer and is also an agent for the title insurer may properly retain as part of his or her fee for representing the developer a portion of the premium that the purchaser pays for the title insurance, provided full disclosure is made to the purchaser.
Opinions: 65-58, 69-39, 73-1, 74-50
Rules: Fla. Admin. Code §4-21.03
Vice Chairman Sullivan stated the opinion of the committee:
A condominium developer uses a form purchase agreement which requires the developer to deliver to the purchaser at closing an owner's title insurance binder from Lawyers' Title Guaranty Fund or such other reputable title insurer as the developer may determine and the purchaser to pay for it in accordance with the standard card rate generally in existence and accepted by title insurers in the county where the condominium is located.
We are asked whether the lawyers for the condominium developer may with propriety retain as part or all of their legal fee for closing a sales transaction for the developer part of the premium the purchaser pays for the title insurance pursuant to the provision in the purchase agreement.
Ordinarily, the attorney for the purchaser obtains the title insurance, and the purchaser pays for it. The minimum risk rate that the Insurance Commissioner requires a title insurer to charge (Section 4-21.03 of the Administrative Code of Florida) exceeds the amount that the agent must remit to the insurer. We note that attorneys who are members of Lawyers' Title Guaranty Fund and act as agents for the Fund commonly retain as part of the fee they charge their clients for handling a particular transaction the difference between the premium they are required to charge and the amount remitted to the Fund.
This inquiry assumes that the developer's attorney will obtain the title insurance and the developer will pass the cost on to the purchaser pursuant to the purchase agreement.
We view the provision in the purchase agreement requiring the purchaser to pay for owner's title insurance obtained by the developer as an item open for negotiation at the time the developer and purchaser discuss terms and, if not prohibited by statute, find no impropriety in such a provision. The purchaser does not have to agree to it initially.
In Opinions 65-58 and 69-39, we found no impropriety in arrangements that shift to a purchaser or borrower part or all of a seller's or lender's attorney's fees and other costs but in Opinion 69-39 said that the mortgage company's attorney should make it clear to the seller and the purchaser that he was in fact attorney for the mortgage company.
The present inquiry narrows to the question whether disclosure of such an arrangement regarding title insurance is required. We believe that it is even though the purchaser pays the same amount for the title insurance regardless of where the premium goes. Thus, we are of the opinion that the attorney for such a condominium developer may properly retain as part or all of his fee for representing the developer the part of the premium from Lawyers' Title Guaranty Fund the lawyer retains as agent provided that disclosure of that fact is made to the purchaser. We believe that the disclosure should be made at a time and in a manner that gives the purchaser a choice and not at the closing after the purchase agreement has been signed, presumably a deposit made and title insurance already obtained. See Opinions 74-50 and 73-1.