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