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95 N.J.L.J. 1345
December 28, 1972
COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW
Appointed by the New Jersey Supreme Court
Practice of Title and Abstract Complaints
Q. Is a title or abstract company guilty of the unlawful
practice of law when it issues a title policy or provides an
abstract of title and general search affecting premises in New
Jersey to a person other than the present owner, a prospective
buyer, or an attorney for a party interested in the premises? More
specifically, is it the unlawful practice of law for a title or
abstract company not only to condone but to encourage, by rebate,
the real estate agent involved in a sale to order a title policy or
search for the buyer and lender, often before a binding sales
agreement has been executed?
The measuring rod is the public interest. Auerbacher v. Wood,
142 N.J. Eq. 484, 486 (E. & A. 1948); N.J. State Bar Association v.
Northern N.J. Mortgage Association, 22 N.J. 184, 195 (1956). Is
the public injured by this practice? The answer is to be found by
determining whether any skill or knowledge possessed by a lawyer is
of value to the public in the ordering of title searches or
The history of title searches goes back many years while that
of title insurance is shorter. The purposes in both is to give
assurance to a prospective buyer or lender that the title to the
premises is marketable. Title searches cover those items of record
which might affect the title, while title insurance adds such other
items, not necessarily of record, which might affect the title.
Title insurance does not make a title more "marketable" in the
legal sense, but does in the economic sense. It is insurance in
that it covers unforeseeable risks such as frauds, forgery and
human errors. Government and interstate lending agencies generally
require title insurance so they can package and make a market for
their mortgages in interstate commerce. The whole field of title,
whether "marketable" or "insurable," is deeply interwoven with
legal questions and problems on which only one trained in and
authorized to practice the law can properly advise the buyer.
To get a title insurance policy does not mean, contrary to
popular opinion, that you are necessarily certain that you have or
can get a "marketable title" or even an "insurable title." Title
companies, after they make the title search, issue a report of
title, which almost always contains numerous exceptions, some
standard and some special to the particular title. Unless these
exceptions are removed in a manner satisfactory to the title
company, they will appear in the final policy as exceptions. Some
exceptions the buyer can live with and some would be highly
objectionable to him if he realized their significance. He cannot
rely upon the lender for in some cases the title may be insurable
for the limited period of a mortgage, but not for the indefinite
period of the fee ownership.
There are a variety of title searches, based upon various
statutes of limitations. The minimal period is 20 years, an
average is 30 years and the maximum 60 years. Each period has its
advantages based on problems which may be present in a particular
title. Titles based on tax sale foreclosures, those derived
through a trustee in bankruptcy, the sheriff, or other government
officials or agents may require an examination of records and
sources outside the normal halls of record.
Premises with certain special appurtenances, such as
easements, rights of way, private or public, and riparian rights
may require searches of premises beyond the premises in question.
Premises which may consist of not only real estate but fixtures
will require searches of financing statements on file in the
Clerk's Office or at the Office of the Secretary of State.
It is obvious that a buyer does not merely step up to the
counter of a search or title company and say, "Sell me a search or
title policy," and expect to get a standard one of either. They
are not ready-made, but custom-built. The first basic question is:
Do I require and want a search, or a title policy? What are the
advantages and disadvantages of each? If a search, what variety,
a 20, 30 or 60 year one? What should the search cover by way of
premises? Are there any other proceedings which I must have
searched besides those in the Register of Deeds, Clerk's Office,
Surrogate's Office, Clerk of the Federal District Court and N.J.
Superior Court? If title insurance, will the standard exceptions
be acceptable? What exceptions can I live with?
If a buyer is faced with these questions, how much more so is
the real estate agent? At least the buyer can be objective and
without any conflict of interest, while the realtor, the agent for
the seller, who will probably receive a "rebate" from the title or
abstract company, can scarcely be.
It is obvious that the selection of the proper title search or
title policy and the extent and nature of the legal liability of
the searcher or insurer is fraught with numerous legal problems for
which the buyer's attorney is trained to advise. Based on such
advice, the buyer can make a sound decision and avoid unnecessary
expenses and headaches.
Is the public served by the practice of title and abstract
companies issuing a title policy or providing an abstract to a
party other than the seller, buyer or their attorney? Obviously
not. Since the practice does constitute the practice of law and
such practice by a lay corporation or person is not in the public
interest, it constitutes the unauthorized practice of law.
Q. Is a title or abstract company guilty of the unlawful
practice of law when it conducts real estate settlements on its
premises without the presence of an attorney for any of the parties
to the transaction?
Evidence before this committee discloses a growing practice in
the southern part of the State to exclude lawyers from the real
estate transaction completely. With the realtors ordering the
searches, with title companies holding the closing at their offices
or at the realtor's office, and with the title company preparing
the necessary instruments to remove exceptions, it was admitted
that in 90% of the cases, particularly in sale of houses in
developments, no lawyer is present at the closing or settlement,
either for the seller, buyer, or even the lender. In fact, the
realtors and developers discourage the parties from engaging the
services of a lawyer for lawyers are "expensive", "slow up" or
"foul up" the settlement. The fewer questions asked the better!
Again, the test is, does this practice serve the public
There is no question but that the "practice of law embraces
the art of conveyancing." Cape May County Bar Association vs.
Ludlam, 45 N.J. 121, 124, (1965). The final and more critical act
in conveyancing is the closing of settlement. See "Title Insurance
and the Unauthorized Practice of Law Controversy," 35 Unauthorized
Practice News, Spring 1969 at page 63. This is the time when all
streams flow together. The deed and consideration are exchanged in
cash or by a mortgage. Resolutions, releases, leases and other
conveyancing documents may be required. The search or title policy
is brought down to date to establish good and marketable title.
Exceptions are removed or accepted. If ever the layman needed
legal counsel it is at the settlement. The practice of title
companies in holding settlements without the presence of attorneys
only lulls the layman into a false sense of security. If the
matter of getting a good marketable title is so important as to
warrant title insurance at a substantial premium, by the same
token, the buyer is warranted in securing independent counsel to
assure himself that he will have a good marketable title suitable
for his needs. In N.J. State Bar Ass'n v. Northern N.J. Mortgage
Associates, 32 N.J. 430, 447, (1960) the Court pointed out that:
***to encourage parties to obtain the important
protection of independent counsel***the public
interest***will be significantly advanced***
A corporation may not engage in the practice of law "even as
an incident to its lawful business", N.J. State Bar Ass'n v.
Northern N.J. Mortgage Associates, 22 N.J. 184, 197 (1956).
Though the title company may claim that it makes no separate
charge for title corrective services, this argument was rejected by
our Supreme Court in N.J. State Bar Ass'n v. Northern N.J. Mortgage
Associates, supra, 32 N.J. at 444.
The present practice of title companies in conducting closings
or settlements without the presence of attorneys, which is part of
a system that discourages the presence of attorneys, does
constitute the practice of law. Since such practice by a lay
corporation or person is not in the public interest, it constitutes
the unauthorized practice of law.
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