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                                         90 N.J.L.J. 841
                                        December 28, 1967


Appointed by the New Jersey Supreme Court


Disbursing Closing Fees

    We are asked if an attorney may represent a lending institution at closing, collect all the funds at the closing, disburse them in accordance with a form of closing statement attached to the inquiry, and collect and remit to the title company insuring the title a sum listed under the entry:
        Closing charges,
            Searches, title examination and disbursements... .

    The average bill for the charges is stated to be $250-$275 and in most instances there is no connection between the title company and the mortgagee. The amount charged is to be paid directly to the title company, no portion being retained by the attorney. This is in addition to the usual premium charges for title insurance.
    The preparation of the closing documents is done by the attorney. It is stated that the attorney is actually compensated by the mortgagee where it is an insured loan such as G.I. or F.H.A. and points are being charged. In other instances where a conventional loan is being closed, the mortgagors pay to the attorney the fee for the services of preparation of mortgage documents and closing. The sum charged is $50.See footnote 1 1 Appropriate procedures are stated to be employed to advise the mortgagor that the closing attorney represents only the lending institution and that the interests of the purchaser mortgagor might be better protected if he engaged an attorney of his own choice.
    In our Opinion 99, 89 N.J.L.J. 689 (1966), we held that an attorney could not actually collect the sum of $300 at a mortgage closing under the heading "Examination of Title" and remit the balance to a title company after taking a $75 fee for himself. The vice in that procedure was that there was an improper division of fees in violation of Canons of Professional Ethics, Canon 34 and our previous holdings in Opinion 93, 89 N.J.L.J. 248 (1966), and Opinion 87, 88 N.J.L.J. 799 (1965). Here the factual situation is the same as that in Opinion 99, supra, except that instead of splitting the fee for legal services, the attorney receives no fee or a nominal fee from the mortgagor and remits directly to the title company the charge which he could not share with the title company under Opinion 99.
    The difference is one of form and not of substance. While there is no improper division of fees presented by the instant inquiry, the question is whether the attorney may properly act where his principal - the mortgagee - is to his knowledge requiring the mortgagor to pay a sum ($250-$275) which appears to us to include legal expenses.
    We have previously stated that an attorney's principal may require the payment of legal fees as part of the cost of a transaction "where the attorney has fixed the amount of his fee in a manner consistent with Canons of Professional Ethics," Opinion 93, 89 N.J.L.J. 248 (1966). See also our Opinion 110, 90 N.J.L.J. 297 (1967).
    However, where the attorney does not actually fix or receive the fee and has his principal reimbursed therefor, the charge for "legal expenses" or "legal fees" is improper. Opinion 93, supra, (municipality may not collect from purchaser $125 for "legal expense" to prepare deeds). See also Opinion 103, 90 N.J.L.J. 49 (1967) (holder of note may not collect attorney's fee not actually paid to attorney and fixed by attorney in accordance with Canons).
    Is the situation changed because the charge is labeled as "Searches, title examination and disbursements" and not "legal fees." We think not. The estimated charges are in excess of those normally charged for abstracting work and presumably reflect a charge for evaluation of the state of title. Our Supreme Court has held that "The practice of law embraces the art of conveyancing...," Cape May Co. Bar Ass'n. v. Ludlam, 45 N.J. 121 (1965); see also New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates, 32 N.J. 430 (1960) (drawing of legal instruments is practice of law). It is not within the province of this Committee to determine the legal propriety of the acts of laymen or corporations. However, Canon 47 states that:
        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 lay agency, personal or corporate.

    Where an attorney aids a lay agency in collecting fees for essentially legal services, the attorney is in violation of Canon 47, Drinker, Legal Ethics 181 (1953). We are satisfied from the facts that this is the case here and advise the inquirer that to participate in the closings as outlined would be improper.

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Footnote: 1 1

It is also stated that "the only additional amount retained by he attorney is the commission that is payable by the title company on the fee portion of the policy that is issued." It does not appear that the same is done with disclosure and consent. This practice is in violation of our Opinion 12, 86 N.J.L.J. 621 (1963).

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