105 N.J.L.J. 521
June 5, 1980
Developer's Set Legal Fees Passed on
to Lot Purchaser Under Contract of Sale
An attorney has asked whether he would be violating any disciplinary rule by representing the owner of a real estate tract being developed for residential housing who uses the following clause in his standard contract of sale:
SELLER has prepaid all legal fees for the obtaining of governmental approvals to build the project, reviewing the title, arranging for financing of the development and the necessary title work incident thereto, procurement and closing of the permanent mortgage and including the preparation of any and all closing documents and incidental legal review fees. BUYER agrees to reimburse the SELLER for this legal cost in the amount of $500 at closing.
The inquirer states that the developer's attorney would not prepare or review any documents relative to the individual lot buyers, nor would he prepare any documents relative to any mortgage. The sole purpose of the above-quote language would be to pass along the developer's legal costs to the ultimate buyers.
Although the inquirer is specifically concerned with the manner in which the $500 fee is set, the relationship of the fee to the services performed for each individual buyer and the possibility that the fee is excessive to the extent that it "evidences an intent to overreach" under DR 2-106(D), we prefer to dispose of the inquiry on a different basis. The broad references in the above-quoted provision in the contract of sale to "reviewing the title" and "the preparation of any and all closing documents and incidental legal review fees" are likely to lead buyers to presume, incorrectly, that any necessary title work is being done on their behalf and that they will be represented at closing by the developer's attorney. Accordingly, we find the challenged provision to be improper. See our Opinion 13, 87 N.J.L.J. 1 (1963).