Can the principals of a New Jersey law firm set up a separate title abstract company to prepare title reports for the firm's own foreclosure clients?

Plain-English summary

The Committee was asked whether the principals of a law firm could form a separate title abstract company, organized as a limited liability company, to provide title reports for the firm's foreclosure clients. The proposed entity would not sell title insurance; it would obtain searches from independent contractors, review the results, and prepare title reports submitted to the firm for use in its foreclosure actions. The abstract company would share office space with the firm under separate signage, bill the firm for each report (passed through to the client as an expense), and cap its liability per report at $1,000. The Committee concluded that, under those facts, the principals may not establish the company.

The available full-text mirror of this opinion is truncated after the statement of facts and does not include the Committee's full rule analysis; the linked official source controls. The result fits the Committee's long line of opinions treating an attorney's beneficial interest in a real-estate-related service used for the attorney's own clients as a conflict of interest, addressed in detail in Opinion 682.

Currency note

This opinion was issued in 2000, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a New Jersey law firm's principals run a side title abstract company that serves the firm's own foreclosure clients?

A: No. On the facts presented, the opinion concluded that the principals may not establish such a company.

Q: Did it matter that the abstract company would not sell title insurance, only prepare title reports?

A: The proposed company's business was limited to obtaining searches, reviewing them, and preparing title reports for the firm's foreclosure matters, and the Committee still concluded the arrangement was not permitted on the facts presented.

Background and rules framework

The opinion sits in the Committee's line of decisions on attorney-owned, real-estate-related businesses that serve the attorney's own clients (see Opinion 682, addressing attorney ownership of a title insurance company). Those opinions treat the lawyer's beneficial interest in such a service as creating a conflict between the lawyer's financial interest and the duty of undivided loyalty to the client. The mirror's excerpt of Opinion 688 does not reproduce the specific rule citations in the Committee's analysis; the linked official source controls.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NJ RPC 1.7 (conflicts of interest; the duty of undivided loyalty underlying the Committee's title-company line of opinions)

See also

• NJ ACPE Op. 682: Attorneys Owning and Managing a Bar-Related Title Insurance Company
• CO Bar Formal Op. 38: Referral Fee From a Title-Examining Lawyer

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2005/acp688-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Full opinion text unavailable from the official source; see the linked source above for the complete text.