Get Real (Estate)

A Hearing Committee of the Massachusetts Board of Bar Overseers recommends a year and a day suspension with all but two months stayed with conditions that include restitution of overcharges and Bar Counsel review of his real estate disclosure documents

In at least the thirty-eight (38) real estate transactions described…above, the total amount paid by the respondent’s clients for the title insurance was over fifty-one thousand dollars ($51,000). The total commissions paid to the respondent for the sales of the title insurance to these clients was over forty thousand dollars ($40,000). In at least the thirty-eight (38) real estate transactions described…above, the respondent did not disclose to the clients that he was acting as the title insurance company’s agent in the sale of the title insurance. The respondent did not advise the clients in writing of the desirability of seeking the advice of independent counsel in the respective title insurance transactions. The respondent did not obtain the clients’ informed consent to the essential terms of the respective title insurance transactions and the respondent’s role in the respective transactions in a writing signed by the clients.

Misconduct findings

The respondent engaged in repeated misconduct in connection with representing buyers in residential real estate closings over the span of approximately twenty-one months. We face two distinct issues in this matter. The first is that it was the respondent’s standard practice to intentionally overstate a common charge in real estate transactions on the HUD-1s, collect the overstated cost from his unknowing clients, pay the actual cost, and then keep the difference for his own use. Secondly, we confront an allegedly common practice in Massachusetts real estate  conveyancing – the closing attorney’s sale of title insurance to buyers (his clients) without disclosing that he was acting as an agent of the title insurance company and would earn a commission on the sale.

No big deal

As a final thought, we are troubled by the respondent’s description of the overstated charges, in his brief on disposition, as “de minimis” as well as his assertion that “the excess amounts were small and caused little harm to the client and no harm to the lender.” Respondent Brief, pp. 6 and 8. No amount of money, effectively misappropriated from a client by a lawyer, is de minimis. We want to be clear that we do not consider this ethical transgression to be trivial. Further, the respondent’s actions were not “negligently misleading” as he initially characterized them (Respondent Brief, p.8)—they were intentionally misleading. See Tr. 20-21 (Respondent’s Counsel, conceding at the hearing that the respondent’s conduct with respect to the survey fees was “intentional misrepresentation”). The respondent intentionally overstated the plot plan survey fees and failed to disclose the actual fee or that he was keeping the difference. This systematic practice affected thirty-eight real estate clients in one month alone. When we extrapolate over the entire twenty-one-month period, this practice must have affected hundreds of clients resulting in the small amounts siphoned off from each transaction becoming cumulatively substantial. We agree with bar counsel’s contention that the respondent’s misconduct here was “inherently dishonest.” BC Brief, p. 8.

Title insurance

While it is not prohibited for a lawyer to sell title insurance, even to buyers he is representing in the real estate transactions, the respondent’s ethical misstep was that he entered into these business transactions with clients without meeting the strict conditions of Rule 1.8(a). Entering into business transactions with clients presented a conflict of interest for the respondent: his own financial interest in completing the transactions inherently limited his ability to offer unimpaired representation to the buyers. In order to proceed in the face of this conflict, the respondent was required to take certain actions under Rule 1.8(a). First, he was required to disclose to his clients (the buyers), in writing, that he was acting as the title insurance company’s agent in the sale, rather than as their attorney, and would receive an 80% commission. Secondly, he needed to advise his clients, in writing, of their right to seek the advice of independent counsel about the sale as well as obtain his clients’ informed written consent to the transaction. He failed to do so. In the month of August, 2019 alone, the respondent sold title insurance to his clients in thirty-eight transactions and he received over $40,000 in commissions, representing an 80% commission on each sale of a title insurance policy. We concluded that this misconduct violated Mass. R. Prof. C. 1.8(a).

Real estate

Real estate lawyers are very visible to the public. For many people, a real estate lawyer might be their only personal contact with a lawyer and receiving legal services. We must consider a sanction substantial enough to deter other lawyers from similar conduct and ensure the public’s trust in the system, particularly as real estate transactions typically involve clients signing mountains of paperwork that they may or not read or understand on their way to home ownership.

(Mike Frisch)