Can a lawyer who represents a party in a real estate deal also act as agent for the title insurer and keep part of the title insurance premium?

Plain-English summary

The committee revisited N.Y. State 351 (1974) in light of new practices in which lawyers became agents for title insurers and split premiums with them. It catalogued the arrangements in use (attorney-closer, approved attorney, examining counsel, and full agent), noting that what the client pays and what the lawyer keeps vary substantially depending on the lawyer's relationship with the title company, and that at least some of the differences look like an inducement to "get the business" rather than payment for distinct legal services.

On the legal backdrop, the committee observed that after N.Y. State 351, Congress enacted RESPA (12 U.S.C. 2601 et seq.) and New York enacted Insurance Law section 6409(d), both aimed at curbing kickbacks and reducing title-insurance cost, but said it does not opine on questions of law. It proceeded on the assumption that the lawyer may receive payment from the title insurer only for services actually rendered. Reaffirming N.Y. State 351 (and citing N.Y. State 556 on permissible dual practice as lawyer and title-insurance representative), it set out a detailed ethical analysis.

The committee identified several constraints. A lawyer has a duty not to let an interest in a fee override the client's interest in avoiding unnecessary cost, and so should afford the client any available savings. Disclosure must be full, including the amount the lawyer receives from the title company and the possible availability of insurance at lower cost; without it there can be no informed consent (DR 5-105(C), DR 5-107). The lawyer must credit the client with amounts received from the title company unless the client expressly consents otherwise, and even with consent may not collect an aggregate fee that is excessive (DR 2-106(A); EC 2-17), with compensation for duplicative services treated as excessive. Because every sale, purchase, or mortgage carries an inherent potential conflict between the client and the title insurer over what risks to insure, the lawyer must stay alert and withdraw from representing both if a true conflict arises, unless it can be cured by using another insurer (DR 5-105). The committee also held that a lawyer paid by a lender-mortgagee whose fee is passed to the borrower is still bound by the reasonable-fee limits and may not assist in evading legal duties (DR 1-102; DR 7-102). Subject to all these qualifications, the questions were answered in the affirmative.

Currency note

This opinion was issued in 1986, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (conflicts now appear at Rule 1.7, fees at Rule 1.5, and business transactions with a client at Rule 1.8(a)). The opinion also rests on a reading of RESPA and Insurance Law section 6409(d) as they then stood, which it expressly declined to apply as law. 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 real estate lawyer also be the title insurance agent on the same deal?

A: Yes, with safeguards. The committee held the lawyer may act as title-insurance agent only if the arrangement is legal, no prohibited conflict exists, all parties consent after full disclosure, and the fee is not excessive.

Q: Can the lawyer keep a share of the title insurance premium?

A: Only for services actually rendered, and the client must be credited. The committee held the lawyer must credit the client with the title-company payment unless the client expressly consents otherwise, and may not collect an aggregate fee that is excessive or paid for duplicative services.

Q: What must the lawyer disclose?

A: The amount and the alternatives. The committee held disclosure must be full, including the amount the lawyer receives from the title company and the possible availability of the insurance at lower cost, so the client's consent is informed.

Q: When must the lawyer withdraw?

A: When a true conflict arises. The committee held that because the client and the title insurer inherently differ over what risks to insure, the lawyer must withdraw from representing both if an actual conflict develops, unless it can be cured by using another title insurer.

Background and rules framework

The opinion interpreted DR 5-105 and DR 5-105(C) (multiple representation and consent), DR 5-107 (compensation from a third party), DR 2-106(A) with EC 2-17 (reasonable and non-excessive fees), DR 6-102(A) (limiting liability), and DR 1-102 and DR 7-102 (misconduct and representing a client within the law). The closest current Model Rule analogues are Rule 1.7 (conflicts of interest), Rule 1.5 (fees), and Rule 1.8(a) (business transactions with a client and lawyer's pecuniary interests).

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflicts of interest)
• MR 1.5 (fees)
• MR 1.8(a) (business transactions with a client; pecuniary interest adverse to a client)
• NY DR 1-102; DR 2-106(A); DR 5-105, 5-105(C); DR 5-107; DR 6-102(A); DR 7-102; EC 2-17

Statutes:

• RESPA, 12 U.S.C. 2601 et seq.: bar on kickbacks and unearned fees in real estate settlement services (the committee did not opine on its application)
• N.Y. Insurance Law section 6409(d): bar on rebates of title-insurance premiums as referral compensation

Other opinions cited:

• N.Y. State 351 (1974): the predecessor opinion, here amplified
• N.Y. State 556 (1984): permissible dual practice as lawyer and title-insurance representative
• ABA Formal Op. 331 (1972); ABA Formal Op. 348 (1982): accord on attorney-agents and on client funds

See also

• NY State Bar Op. 595: A law firm co-owning a title abstract company
• NY State Bar Op. 738: Referring clients to a lawyer-owned title abstract company
• NY State Bar Op. 621: Referral to an attorney-owned abstract company
• NY State Bar Op. 891: Referrals by an attorney to a title company

Source

• Landing page: https://nysba.org/opinion-576/