Under what circumstances may an attorney representing a party to a real estate transaction accept a fee consisting of a percentage of the title insurance premium from the title insurer?
An attorney may accept a fee from the title insurance company if the attorney has actually performed services on behalf of the company. Any fee arrangement with the title company would give rise to an attorney-client relationship between the lawyer and the title company. The relationship would therefore be embraced by all the relevant disciplinary rules. In this regard, the fee received by the attorney must be reasonable under Disciplinary Rule (DR) 2-106, whether based on a percentage or some other mode of calculation.
Since the arrangement causes the title company to become a client of the attorney, a situation of multiple client representation is presented. Disciplinary Rule 5-105 (A) and (B) provides that an attorney shall decline employment or withdraw from employment if the multiple representation will, or is likely to, adversely affect the exercise of the attorney's independent judgment on behalf of a client. On the other hand, such employment may continue, despite DR 5-105(A) and (B), if it is obvious that the lawyer can adequately represent each interest, and each client consents after full disclosure of the possible effects on the lawyer's representation of the client interest. DR 5-105(C).
Disciplinary Rule 5-105 requires disclosure if there is a likelihood of an adverse effect on the exercise of the attorney's judgment. If the attorney sees such a likelihood, he should, of course, disclose it, but circumstances may exist where a disclosure that the lawyer is also representing the title company is not only advisable, but required at the outset or when the joint representation requires it.
This opinion makes no interpretation of Article 9 of the Texas Insurance Code.
An attorney representing a party to a real estate sale may accept a percentage of the title insurance premium only for services actually rendered the title company. The attorney becomes the attorney of the title company; the fee charged the title company should therefore be reasonable.
The lawyer should make such disclosures to all his clients in the transaction as the rules and statutes may require, depending on the facts in each situation, and is bound by the usual and customary rules of multi-client representation as they apply to the particular facts at hand. (9-0.)