Fees Charged by Real Estate Settlement Service.

I am writing in response to your letter of July 10, 1990, requesting an Unauthorized Practice of Law advisory opinion regarding whether a title company may charge a fee to a real estate seller for document preparation of a Deed, 1099 Form and Owners Affidavit.

At its August 3 and October 5, 1990 meetings, the Committee reviewed the issue you raise and has directed me to reply to your inquiry. The Committee has earlier opined that it is the unauthorized practice of law for a title company or real estate settlement service to prepare deeds, deeds of trust and notes on behalf of a real estate seller or purchaser. See UPL Opinions 76, 80, 86, and 91. Furthermore, the Committee has also opined that an escrow and title company may charge a “closing fee” so long as the fee is not charged for the preparation of legal instruments or the provision of legal services. See UPL Opinions 80 and 91. Finally, the Committee opines that, although Unauthorized Practice Rule 6 103(A)(4) permits a lender to prepare legal instruments affecting title to real estate securing the payments of its loan, for which no separate charge shall be made, no such preparation is permitted to a third party engaged in real estate settlement services. [emphasis added] See" UPL Opinion 112. Thus, the Committee is of the opinion that, since a settlement service which prepares deeds is engaged in the unauthorized practice of law, any provision which requires payment of a fee for such documents would appear to the committee to be void.

The Committee is of the opinion that questions as to other fees being charged to the seller by the settlement service raise issues of contract law beyond the purview of the Committee. However, the Committee does direct your attention to Legal Ethics Opinion 911, as recently reconsidered by the Bar’s Standing Committee on Legal Ethics, citing Internal Revenue Code § 6045(e)(3) which makes unlawful any separate charge made to a customer by a real estate reporting person for complying with the requirement to file a Form 1099 return and statement relative to a transaction.

Committee Opinion
October 31, 1990