Legal Ethics Opinion #1509 Misconduct-Fees-Competence and Neglect-Client Funds: Disclosure to Client of Attorney's Delegation to Non-Lawyer of Title Search You have presented a hypothetical situation in which real estate attorneys who formerly examined title for a buyer prior to that buyer's purchase of property now rely instead on title insurance companies to do the actual search. You state that real estate agents and buyers are routinely unaware that this service is not being provided by the closing attorney. You state also that this practice has resulted in higher title insurance costs. You further indicate that many title insurance companies provide a "run up" and recording service for an additional fee. You advise that, apparently, most buyers are never made aware that the search fee and/or recording fee is being charged to them as part of their title insurance cost. You state that the majority of attorneys using title insurance services simply lump all of the costs into one blanket fee, despite the fact that the HUD closing statement provides for a disclosure that the cost includes other services. Finally, you indicate that even those attorneys who disclose that the title insurance company provided the title examination for a fee only notify the client of that fact at the time of closing. You have asked the committee to opine, under the facts of the inquiry, (1) whether and when the closing attorney relying on a title company search must advise the buyer that the attorney is not certifying title; and (2) whether and when the attorney must disclose to buyer that the title insurance premium includes search and recordation fees and is not limited to the insurance premium. The appropriate and controlling Disciplinary Rules related to your inquiry are 1-102(A)(4) which states that a lawyer shall not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation which reflects adversely on a lawyer's fitness to practice law; 2-105(A) which provides that a lawyer's fee shall be reasonable and adequately explained to the client; 6-101(D) which states that a lawyer shall inform his client of facts pertinend of communications from another party that may significantly affect settlement or resolution of the matter; and 9-102(B)(3) which requires that a lawyer shall maintain complete records of all funds, securities and other properties of a client coming into possession of the lawyer and render appropriate accounts to his client regarding them. You do not indicate whether the closing attorney represents the buyer, seller, or both in the transaction. As to whether and when the closing attorney must advise the buyer that the attorney is not certifying title, the committee opines that if the closing attorney represents the buyer, disclosure prior to closing is mandated under DR 6-101(D). If, however, the closing attorney represents the seller, the committee is of the opinion that since there is no attorney-client relationship with the buyer, the attorney does not have an affirmative duty to inform the seller that he is not certifying title. The committee has earlier opined that, under DR 7-l03(A)(2), an attorney representing only the lender is not required to advise the borrower that the title insurance obtained is for the lender only. See LEO #1436. As to whether and when the attorney must disclose to buyer that the title insurance premium includes search and recordation fees, the committee directs your attention to LEO #1220 in which the committee opined that the masking of legal fees in the title insurance premium was improper and violative of DRs 1-102(A)(4), 2-105(A), and 9-102(B)(3). Thus, in the facts you present, the committee therefore believes that the hiding of search and recordation fees in the title insurance premium would be violative of the above-mentioned disciplinary rules. The committee believes that such actions would be deceptive and misleading practices that would not accurately reflect the charges made to the client. Thus, the committee opines that the attorney must disclose to the buyer, prior to closing, the inclusion of the search and recordation fees in the title Committee Opinion February 9, 1993
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