The Florida Bar
OPINION 75-40A lawyer may, with client consent after full disclosure, participate in an arrangement with a title company whereby the title company prepares a title commitment to which the lawyer adds an endorsement and the title company remits a substantial percentage of the title insurance fee to the lawyer.
June 15, 1977
June 15, 1977
Canon: 38, Canons of Professional Ethics
CPR: EC 2-21; DR 5-107(A)(2)
Opinions: 74-50, 75-27
Misc.: Drinker, Legal Ethics , p. 97; Real Estate Settlement Procedures Act of 1974, 41 Fed. Reg. 109
Vice Chairman Lehan stated the opinion of the committee:
This inquiry concerns the circumstances outlined in Opinion 74-50, i.e., an arrangement between a lawyer and a title insurance company under which:
1. The lawyer would ask the title company for a commitment;
2. The title company then prepares and signs by its authorized in-house agent a title commitment in usual form and sends same to the attorney, accompanied, however, by a photocopy of the title company's search;
3. The lawyer then spends whatever time he wishes "looking at the search;"
4. The attorney adds a stamped or typed endorsement to the commitment stating that the title appears to be the way the title company says it is, then signs his name; and
5. Finally, the title company "remits a substantial percentage of the title insurance fee" to the lawyer.
Opinion 74-50 finds that arrangement unethical for the reasons stated therein.
The present inquiry is:
(a) whether the arrangement above is permissible if the attorney makes full disclosure to the client of the amount received from the title company and obtains the client's consent; and
(b) to what extent, if any, the attorney must credit against any fee charged the client the money the title company has remitted to him.
For purposes of this inquiry, we assume that the premiums charged by any competing title companies between which the attorney might choose in placing title insurance and the amounts of the premium each title company would remit to the attorney are competitive. Also, the underlying facts, as we construe them for the purpose of this opinion, involve the attorney bearing responsibility to the title company for the status of title in the event a title defect causes loss. See Opinion 75-27.
The Committee is of the opinion that the inquiry should be answered in the affirmative as to (a). As to (b), the Committee is of the opinion that if any part of the fee the attorney charges the client is for time spent looking at the search and endorsing the commitment, the amount the attorney receives from the title company should be credited against that part of the fee. Of course, if the client's consent to the attorney's keeping the money he receives from the title company is conditioned upon the attorney's crediting that amount against the fee charged the client, the attorney should credit the amount received from the title company. Otherwise, it is not necessary to credit against the fee to the client the amount the title company remits to the lawyer.
DR 5-107(A) provides:
(A) Except with the consent of his client after full disclosure, a lawyer shall not:
(2) Accept from one other than his client any thing of value related to his representation of or his employment by his client.
EC 2-21 provides that "a lawyer should not accept compensation or anything of value incident to his employment or services from one other than his client without the knowledge and consent of his client after full disclosure." EC 2-21 is similar to former Canon 38 providing that a lawyer "should accept no compensation, commissions, rebates or other advantages from others without the knowledge and consent of his client after full disclosure." That Canon was construed as permitting, with client consent after full disclosure, "customary allowances" from title companies which "obviously in no way interfere with the lawyer's loyalty to his client." Drinker, Legal Ethics (1953), p.97.
We reach the same conclusion as to the propriety of this practice under the Code of Professional Responsibility. We do not believe that the attorney's accepting the fee from the title company under the circumstances stated above necessarily impairs his ability to properly represent his client.
We add the caveat that, of course, a lawyer may not receive payment from a third party if that would constitute a violation of law. See the Real Estate Settlement Procedures Act of 1974 and regulations thereunder, including those relating to prohibitions as to referral fees. 41 Fed. Reg. 109. The Committee expresses no legal opinion whatsoever as to the effect of RESPA under the facts of this Inquiry or under the facts of Opinion 74-50.