Can a lawyer take part in a real estate closing run at a title company's office where the buyer has no lawyer and the title company handles the paperwork?

Plain-English summary

An attorney representing a seller asked whether his participation in a real estate closing at a title company's office would violate Canon 47, which bars a lawyer from permitting his services or name to aid the unauthorized practice of law by any agency. He also asked whether the answer would differ if the closing took place at his own office. The buyer (a corporation) had asked a title company to insure the title; the buyer would not be independently represented, and an officer of the title company who was a member of the New Jersey Bar would check the deed and affidavit of title, compute adjustments, provide revenue stamps, prepare the closing statement, draw escrow checks, and certify the title to the buyer.

The Committee said the answer turned on whether the title company's actions in fact constitute the unauthorized practice of law, and applied the New Jersey Supreme Court's decisions in New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates (32 N.J. 430 (1960) and 34 N.J. 301 (1961)). Those cases drew a "common-sensible line": a title company may insure titles, cause searches and abstracts to be made, and have its legal representatives at a closing to protect its interests even where the purchaser has no independent counsel, and may voice objections to title and refuse to issue a policy until they are removed, but it may not participate in preparing legal documents or taking legal steps to remove title objections or cure defects.

Tested by those principles, the Committee concluded it did not clearly appear that the title company's activities here were prohibited, with the possible exception of the representative's call to the attorney about minor title problems: merely pointing out defects and stating the title company's requirements was proper, but participating in clearing the objections by preparing legal instruments or taking other legal steps would be unauthorized practice. The Committee said the lawyer could guide himself by the Supreme Court's principles, must refrain from participating if the title company intends to carry on unauthorized activities or has adopted such a standard practice, and that the answer was the same whether the closing took place at the title company's office or the attorney's, and whether or not the title company's representative was a New Jersey attorney.

Currency note

This opinion was issued in December 1964, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canon 47 of the former Canons of Professional Ethics. Assisting the unauthorized practice of law is now treated under RPC 5.5. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer take part in a closing run at a title company's office where the buyer has no attorney?

A: Yes, on the facts presented. The Committee concluded the title company's described activities did not clearly constitute the unauthorized practice of law, so the lawyer's participation was not barred by Canon 47.

Q: What title-company activity would cross the line into unauthorized practice?

A: Preparing legal instruments or taking other legal steps to remove title objections or cure defects. The Committee said merely pointing out defects and stating the requirements for issuing the policy was proper, but clearing the objections by legal means was not.

Q: Does it matter whether the closing is at the title company's office or the lawyer's office?

A: No. The Committee held the answer was the same whether the closing took place at the title company's office or the attorney's, and whether or not the title company's representative was a New Jersey attorney.

Q: What must the lawyer do if the title company does cross the line?

A: Refrain from participating. The Committee said that if the lawyer learns the title company intends to carry on unauthorized activities in a transaction, or has adopted a standard practice indicating such intent, he must refrain from participating in that transaction.

Background and rules framework

The opinion applied Canon 47 of the former Canons of Professional Ethics, which barred a lawyer from aiding the unauthorized practice of law, and turned on the New Jersey Supreme Court's line between permissible and impermissible title-company activities in the Northern N.J. Mtge. Associates cases. In current New Jersey terms, assisting unauthorized practice is governed by RPC 5.5.

Citations and references

Rules of Professional Conduct (as in effect at the time):

• Canon of Professional Ethics 47 (aiding the unauthorized practice of law)

Cases:

• New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates, 32 N.J. 430 (N.J. 1960); 34 N.J. 301 (N.J. 1961), permissible and impermissible title-company activities

See also

• NJ ACPE Op. 120: Disbursing Closing Fees Through a Title Company
• NJ ACPE Op. 612: Relationships Between Attorneys and Title Insurance Agencies
• NJ ACPE Op. 160: Unauthorized Practice, Representing the Other Party

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp61-1.html

Original opinion text

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

87 N.J.L.J. 778
December 3, 1964

OPINION 61
Unauthorized Practice - Title Closings

An attorney inquires whether participation by him in a real estate closing at a title company's office under the circumstances herein described violate Canons of Professional Ethics, Canon 47. He also inquires whether the answer would be different if the title closing took place at his own office. Canon 47 provides:

No lawyer shall permit his professional services, or his name, to be used in aid of, or to make possible, the unauthorized practice of law by any agency, personal or corporate.

This attorney represents a client selling real property to a corporation which has requested a title company to insure the title. A representative of the title company has already called the attorney about the description to be used in the deed and about several minor title problems. The buyer has now requested that the title closing take place at the title company's office. The attorney states that he knows from experience the buyer will not be independently represented by an attorney. However, an officer of the title company who is a member of the New Jersey Bar will check the deed and affidavit of title, compute the closing adjustments, provide revenue stamps, prepare the closing statement, draw checks on the title company's escrow account to pay the seller, the real estate broker, and other closing expenses, and will certify the title to the buyer.

The answers to the inquiries made by this attorney turn upon whether the action of the title company in fact constitutes the unauthorized practice of law. The New Jersey Supreme Court, in New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates (1), 32 N.J. 430 (1960), attempted to draw what it described as a "common-sensible line between permissible and impermissible activities" by title companies in pursuance of their legitimate business of granting mortgages and insuring titles. It held that a title company may insure titles and may cause searches and abstracts to be made, may have its legal representatives at the title closing to protect its interests, even though in many closings the purchaser has no independent counsel. It held also that while a title company may properly voice its objections to the title and refuse to issue its title policy until the objections have been removed, it may not participate in the preparation of legal documents or in the taking of other legal steps necessary to remove the objections to the title or to cure the defects therein. It may impose a charge on the buyer for title insurance and for disbursements representing the usual cost of title searches and abstracts. Where the title company uses its own agents and employees to make the title search and to read the abstract of title, it may also include in the charge the allocated direct and overhead expenses actually incident to the performance of these activities. New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates (2), 34 N.J. 301 (1961).

Tested by the principles enunciated by the Supreme Court in the New Jersey Bar Ass'n. cases, it does not clearly appear that any of the activities performed by the title company in this case are prohibited because they constitute the unauthorized practice of law. The action of the representative of the title company in calling the attorney about the several minor title problems may be a possible exception. If the title company representative merely pointed out the defects and specified the requirements necessary to meet the standards of the title company for the issuance of the insurance, it would appear that this was a proper function as the title company could properly voice its objections to the title and refuse to issue its policy until the objections had been removed. If, however, the title company participated in the clearing of the objections to the title by preparing legal instruments or by taking other legal steps necessary to remove objections to the title, or cure its defects, or proposed to do so, such activities would constitute unauthorized practice of law and would, therefore, be prohibited.

The principles laid down by the Supreme Court in the two New Jersey Bar Ass'n. cases seem to provide sufficient information by which the attorney can guide himself in this as well as in future transactions with the title company. If the attorney learns that the title company intends in a particular transaction to carry on any unauthorized activities or if it becomes evident to him that the title company has adopted a standard practice indicating its intention to do so, the attorney must, of course, refrain from participating in such transaction. The answer to both inquiries is the same whether the closing takes place at the title company's office or at that of the attorney representing the seller, and whether or not the representative of the title company is a New Jersey attorney.