26Oct/10

The Invisible Agent

Under RESPA, the only permitted payments to attorney agents by title companies is a reasonable fee for services actually rendered. By calling a title company and placing an order, an attorney is not rendering a service.

Facts: A is an attorney who, as a part of his legal representation of clients in residential real estate transactions, orders and reviews title insurance policies for his clients. A enters into a contract with B, a title company, to be an agent of B under a program set up by B. Under the agreement, A agrees to prepare and forward title insurance applications to B, to re-examine the preliminary title commitment for accuracy and if he chooses to attempt to clear exceptions to the title policy before closing, A agrees to assume liability for waiving certain exceptions to title, but never exercises this authority. B performs the necessary title search and examination work, determines insurability of title, prepares documents containing substantive information in title commitments, handles closings for As clients and issues title policies. A receives a fee from his client for legal services and an additional fee for his title agent "services" from the clients title insurance premium to B.

Comments: A and B are violating section 8 of RESPA. Here, As clients are being double billed because the work A performs as a "title agent" is that which he already performs for his client in his capacity as an attorney. For A to receive a separate payment as a title agent, A must perform necessary core title work and may not contract out the work. To receive additional compensation as a title agent for this transaction, A must provide his client with core title agent services for which he assumes liability, and which includes, at a minimum, the evaluation of the title search to determine insurability of the title, and the issuance of a title commitment where customary, the clearance of underwriting objections, and the actual issuance of the policy or policies on behalf of the title company. A may not be compensated for the mere re-examination of work performed by B. Here, A is not performing these services and may not be compensated as a title agent under section 8(c)(1)(B). Referral fees or splits of fees may not be disguised as title agent commissions when the core title agent work is not performed. Further, because B created the program and gave A the opportunity to collect fees (a thing of value) in exchange for the referral of settlement service business, it has violated section 8 of RESPA.

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10Sep/10

Sales & Compensating Use Tax

As you know the New York State Department of Taxation and Finance has recently changed its policy on the imposition of sales tax on certain information services.  The new policy will be effective September 1, 2010 for information services delivered to the customer on or after that date.  While we certainly do not have all the answers concerning the implementation of the new policy, the attached list of questions and answers contain a good start at understanding the approach the State will take.

Click here for Q&A Doc

10Sep/10

Indymac Boys Get Sweetheart Deal

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20Aug/10

The New Power of Attorney Law

Known as the Technical Corrections Act, the newest Power of Attorney Law makes sweeping changes to the law on Powers that went into effect on September 1, 2009.

Some of the important aspects of the new law which takes effect on September 12, 2010 and is retroactive to September 1, 2009 are as follows:

  1. Powers of Attorney in favor of condominium boards remain valid and are excluded from the new law, as are commercial powers contained in certain loan documents, corporate proxies and powers coupled with an interest.
  2. The new law makes it clear that a Statutory Gifts Rider is not necessary to transfer a real property interest unless it is a gift. The word “Major” has been deleted from the Statutory Gifts Rider section as it now applies to all gifts over $500.
  3. The execution of a new power no longer acts as an automatic revocation of a prior power.
  4. All previous powers are grandfathered by the new act.
  5. Click here to view the full text of the Technical Corrections Act.