Can a lender insist on its own lawyer examining title instead of the borrower's lawyer, and is that aiding unauthorized practice?

Plain-English summary

A buyer ("A") hired his own attorney to examine title and prepare the purchase contract, then took the title report to a building and loan to borrow part of the purchase price. The lender refused to accept the buyer's attorney's title report and said it would lend only if the title was examined by the lender's own attorney. The committee was asked whether the lender's attorney was aiding and abetting the unauthorized practice of law. It answered no.

Applying Canons 35 and 47, the committee reasoned that the lender's attorney was the attorney for the association lending money on the property that would serve as security, and that the lender had every right to protect itself by requiring a title report and legal opinion satisfactory to it. It relied on Kentucky State Bar Ass'n v. First Federal Savings and Loan Ass'n, in which the Court of Appeals recognized that a title examination is a legal service that may be performed for others only by a licensed attorney, and that such service may be rendered either by the borrower's lawyer (whose certification the lender accepts) or by a lawyer of the lender's own selection.

The committee added that the association has the right to choose the lawyer it wishes to examine title to property it will take as security, and that it might not want the borrower's attorney to examine the title and thereby represent both parties; that situation presents a possible conflict of interest under Canon 6, so both parties must agree to any dual representation. The committee emphasized that the right of every person seeking legal representation to a lawyer of his own choice is one all lawyers should defend. It concluded the lender's lawyer was not aiding and abetting the unauthorized practice of law.

Currency note

This opinion was issued in 1965 under the former Canons of Professional Ethics (in effect in Kentucky from 1946 to 1971) and predates both the 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments and later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific point mentioned here.

Common questions

Q: Can a lender require that its own attorney examine title rather than accept the borrower's lawyer's opinion?

A: Under this opinion, yes. The committee held the lender may insist on a title report and legal opinion satisfactory to it, and that requiring its own attorney is not aiding unauthorized practice.

Q: Is the lender's attorney engaged in unauthorized practice?

A: No. The committee found the lender's attorney was rendering a proper legal service for the association, citing Kentucky State Bar Ass'n v. First Federal Savings and Loan Ass'n.

Q: Can one lawyer examine title for both the borrower and the lender?

A: Only with both parties' agreement. The committee identified a possible conflict of interest under Canon 6 and said both parties must agree to any dual representation.

Background and rules framework

The opinion applied Canons 6, 35, and 47 of the former Canons of Professional Ethics, addressing conflicts of interest (Canon 6) and a lawyer's relationship to lay intermediaries and the practice of law (Canons 35 and 47). The modern analogs are Model Rule 1.7 (concurrent conflicts of interest, including the consent both parties must give to common representation) and Model Rule 5.5 (unauthorized practice of law), with Kentucky's counterparts at SCR 3.130(1.7) and SCR 3.130(5.5).

Citations and references

Rules of Professional Conduct:

• Canons 6, 35, 47 (conflicts of interest; relationship to lay agencies and the practice of law); modern analogs Model Rules 1.7 and 5.5

Cases:

• Kentucky State Bar Ass'n v. First Federal Savings and Loan Ass'n, 342 S.W.2d 397 (Ky.), title examination is a legal service that a lender may have performed by the borrower's lawyer or by a lawyer of the lender's selection

See also

• KBA Ethics Op. E-195: Signing Title Opinions, Lay Research
• KBA Ethics Op. E-121: Certifying Lender-Drafted Documents
• KBA Ethics Op. E-39: Paying a Lender for Closing Help

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-021.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-21
Issued: January 1965

Question:

May a building and loan association refuse to accept a title opinion from
an attorney other than their own without their attorney aiding and abetting
the unauthorized practice of law where both parties agree to the dual
representation?

Answer:

Yes

References:

Canon 6, 35, 47
OPINION

“A” negotiates with a realtor to purchase a piece of property and employs an
attorney to examine the title and prepare the purchase contract. “A” immediately takes his
title report to a building and loan, that advertises its business of lending money, in order to
borrow a part of the purchase price. The building and loan refuses to accept the title report
of “A’s” attorney and states that it will not lend any money unless the title is examined by
the attorney representing the building and loan.

1. Is the attorney for the building and loan aiding and abetting the unauthorized
   practice of law?
   This question involves Sections 35 and 47 of the Canons of Professional Ethics. It
   should first be noted that the attorney for the building and loan is the attorney for the
   association that will be lending its money on the property which is to be the security for the
   loan. The lender has every right to protect itself and to require that it be furnished with a
   title report and legal opinion satisfactory to it. Our Court of Appeals recognizes this right
   and practice in the leading case on this subject, Kentucky State Bar Assn v. First Federal
   Savings and Loan Assn, 342 S.W.2d 397, wherein it is stated:
   It is not questioned that a “title examination” (which includes an
   analysis of recorded interests in land coupled with an opinion as to its legal
   status) is a service which lawfully can be performed for others only by a
   licensed attorney. Customarily in this business such service may be
   rendered by a lawyer representing the borrower (whose certification will be
   accepted by the lender), or it may be performed by a lawyer of the lender’s
   selection (who is paid an attorney’s fee for each such service rendered).

The attorney for a building association is rendering a legal service and the
association has the right to choose the lawyer it wishes to have examine the title to property
which will be mortgaged to it to secure a loan. It would clearly appear that the association
might not want the attorney representing the borrower to examine the title and render an
opinion as to the marketability of such title to the association, and thereby be representing
both parties to the transaction. There is a possible conflict of interest (Canon 6) and both
parties must agree to the dual representation. The right of every person seeking legal
representation to a lawyer of his own choice, is a right all lawyers should defend at all
costs.
In our opinion the lawyer is not aiding and abetting the unauthorized practice of
law.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the
Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530
(or its predecessor rule). The Rule provides that formal opinions are advisory only.