87 N.J.L.J. 778
December 3, 1964
Unauthorized Practice - Title Closings
An attorney inquires whether participation by him in a real
estate closing at a title company's office under the circumstances
herein described violate Canons of Professional Ethics, Canon 47.
He also inquires whether the answer would be different if the title
closing took place at his own office. Canon 47 provides:
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 agency, personal or corporate.
This attorney represents a client selling real property to a corporation which has requested a title company to insure the title. A representative of the title company has already called the
attorney about the description to be used in the deed and about several minor title problems. The buyer has now requested that the title closing take place at the title company's office. The attorney states that he knows from experience the buyer will not be independently represented by an attorney. However, an officer of the title company who is a member of the New Jersey Bar will check the deed and affidavit of title, compute the closing adjustments, provide revenue stamps, prepare the closing statement, draw checks on the title company's escrow account to pay the seller, the real estate broker, and other closing expenses, and will certify the title to the buyer.
The answers to the inquiries made by this attorney turn upon whether the action of the title company in fact constitutes the unauthorized practice of law. The New Jersey Supreme Court, in New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates (1), 32 N.J. 430 (1960), attempted to draw what it described as a "common-sensible line between permissible and impermissible activities" by title companies in pursuance of their legitimate business of granting mortgages and insuring titles. It held that a title company may insure titles and may cause searches and abstracts to be made, may have its legal representatives at the title closing to protect its interests, even though in many closings the purchaser has no independent counsel. It held also that while a title company may properly voice its objections to the title and refuse to issue its title policy until the objections have been removed, it may not participate in the preparation of legal documents or in the taking of other legal steps necessary to remove the objections to the title or to cure the defects therein. It may impose a charge on the buyer for title insurance and for disbursements representing the usual cost of title searches and abstracts. Where the title company uses its own agents and employees to make the title search and to read the abstract of title, it may also include in the charge the allocated direct and overhead expenses actually incident to the performance of these activities. New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates (2), 34 N.J. 301 (1961).
Tested by the principles enunciated by the Supreme Court in the New Jersey Bar Ass'n. cases, it does not clearly appear that any of the activities performed by the title company in this case are prohibited because they constitute the unauthorized practice of law. The action of the representative of the title company in calling the attorney about the several minor title problems may be a possible exception. If the title company representative merely pointed out the defects and specified the requirements necessary to
meet the standards of the title company for the issuance of the insurance, it would appear that this was a proper function as the title company could properly voice its objections to the title and refuse to issue its policy until the objections had been removed. If, however, the title company participated in the clearing of the objections to the title by preparing legal instruments or by taking other legal steps necessary to remove objections to the title, or cure its defects, or proposed to do so, such activities would constitute unauthorized practice of law and would, therefore, be prohibited.
The principles laid down by the Supreme Court in the two New Jersey Bar Ass'n. cases seem to provide sufficient information by which the attorney can guide himself in this as well as in future transactions with the title company. If the attorney learns that the title company intends in a particular transaction to carry on
any unauthorized activities or if it becomes evident to him that the title company has adopted a standard practice indicating its intention to do so, the attorney must, of course, refrain from participating in such transaction. The answer to both inquiries is the same whether the closing takes place at the title company's office or at that of the attorney representing the seller, and whether or not the representative of the title company is a New Jersey attorney.