Opinion ID: 2183644
Heading Depth: 1
Heading Rank: 4

Heading: conclusion

Text: We premise our holding on the condition that both buyer and seller be made aware of the conflicting interests of brokers and title companies in these matters and of the general risks involved in not being represented by counsel. We shall ask the Civil Practice Committee to recommend to us practical methods for achieving those aims. Presumably, that Committee will want to form a subcommittee including those who have been involved with this problem for many years. Obviously, the best way to achieve the goal is to have a knowledgeable disinterested attorney sit down with both buyer and seller and carefully explain both the conflict factor and the risk factor, but we doubt if that would be practical. Pending the report of that Committee and our action on it, we have decided to adopt an interim notice requirement that the broker must comply with. If that notice is not given, the broker will be engaged in the unauthorized practice of law. Furthermore, anyone who participates in the transaction, other than buyer and seller, knowing that the notice has not been given when and as required, will also be engaged in the unauthorized practice of law. As for any attorney who, under the same circumstances, continues to participate in the transaction, that attorney will also be subject to discipline for unethical conduct. At the commencement of the closing or settlement, the title officer in charge shall inquire of both buyer and seller whether, how, and when, the notice was given, and shall make and keep a record of the inquiry and the responses at that time. The interim notice that we require is attached as Appendix A. [6] It is a written notice, and it shall be attached to the proposed contract of sale as its cover page. The notice may be appropriately revised if the broker represents the buyer or is a dual agent, one who represents both seller and buyer. Whenever a broker presents either buyer or seller with the proposed contract, that cover page shall be so attached, and the broker shall personally advise the buyer or seller at that point that he or she must read it before executing the contract. If the contract is not personally delivered by the broker to the buyer or seller, the broker must make certain, prior to such delivery, that buyer and seller have been so informed, and must do so by speaking to them personally or by phone. Assuming such notice is given in accordance with the terms and conditions mentioned above, we hold that attendance and participation at the closing or settlement where neither party has been represented by counsel, or where one has not been so represented, does not constitute the unauthorized practice of law; that brokers may order abstracts, title binders, and title policies; that an attorney retained by the broker to draft a deed and/or affidavit of title for the seller may do so but only if the attorney personally consults with the seller; regardless of the prior restriction, any attorney retained by the broker for that purpose, or any attorney acting for the title company, may draft any of the documents involved in the transaction upon written request of the party, be it buyer, seller, lender, mortgagee, bank, or others; [7] that the title company may participate in clearing up those minor objections which Judge Miller refers to as categories one and two: standard exceptions such as marital status and money liens customarily paid at closing, but not those classified as categories three and four: easements, covenants or other serious legal objections to title. Other equally important protections for buyer and seller should exist. Any broker participating in a transaction where buyer and seller are not represented should have the experience and knowledge required at least to identify a situation where independent counsel is needed. Under those circumstances the broker has a duty, in accordance with the standards of that profession, to inform either seller or buyer of that fact. N.J.A.C. 11:5-1.23(a), (f). Presumably, the same duty applies to any title officer, whether or not an attorney, but especially if an attorney, who becomes aware of the need of either party for independent counsel. In addition to whatever potential action might be taken by the bodies that regulate brokers and title officers, as well as by their own associations, their failure to inform exposes them to the risk of civil liability for resulting damages. Judge Miller's report included the following additional recommendations: that this Court create a committee on real estate practice; that a separate certification be established for real estate attorneys; and that settlement companies be under the supervision of a public entity. We believe that the Civil Practice Committee can perform the function of a committee on real estate practice through a subcommittee. As to certification of real estate attorneys, we refer that matter to the Trial Attorney Certification Board. Concerning settlement companies, as we read the record, they appear to be nothing more than individual brokers, attorneys or title officers performing their roles through a corporation. We request that the Civil Practice Committee make a recommendation concerning the regulation of these entities. In addition, Judge Miller recommended the following, all of which we refer to the Civil Practice Committee for review and report: any unrepresented buyer or seller must execute a written waiver of the right to have counsel; both the broker and title agent must urge buyers and sellers to retain attorneys; the parties conducting a closing must be under the supervision of a public entity; brokers should be required to carry adequate liability insurance. Concerning the prior paragraph, we believe that the disclosure required in this opinion, or such disclosure as the Civil Practice Committee may recommend, may render such added protection unnecessary. While we are concerned about, and determined to afford, adequate protection for buyers and sellers, we do not want to burden the real estate transaction process with detailed requirements that do not add measurable protection. As in New Jersey State Bar Association v. New Jersey Association of Realtor Boards, 93 N.J. 470, 461 A. 2d 1112 (1983), we note that this Court is available to modify our judgment in this matter if the underlying circumstances change or if our resolution of the matter proves either impractical or unwise. As we have noted in this opinion, we have accepted Judge Miller's conclusion that the evidence does not warrant a finding that brokers are discouraging parties from retaining counsel. We assume that the massive failure to retain counsel, including the failure of the parties to avail themselves of the three-day cancellation clause, does not stem from any conspiracy on the part of brokers, but is most likely explained by the common knowledge in that area that most of these matters are handled without counsel and the general level of satisfaction with the situation. We leave it to the organized bar to keep itself informed of those circumstances. If it can be shown at some future date that the South Jersey practice results not from this common understanding, but rather from active discouragement by brokers, this Court will consider appropriate action, including revision of our determination. By allowing the South Jersey practice to continue, this Court does not in any way cede its power over the practice of law. The Court reserves the right and power, depending upon the circumstances, to prohibit that which is permitted under this opinion, or to impose restrictions and conditions in addition to those set forth above. Our decision, while allowing continuation of the South Jersey practice, imposes new conditions on that practice and serious consequences for non-compliance. In order that brokers and others may adjust their practices to comply with those conditions, our decision will not become effective until sixty days from the date of this opinion and will apply to all real estate contracts subject to this opinion that are thereafter executed and to the transactions based on those contracts. The decision of the Committee, Opinion No. 26, is affirmed in part, and reversed in part, and judgment entered declaring the rights of the participants in New Jersey residential real estate transactions in accordance with this opinion. For affirmance in part, reversal in part  Chief Justice WILENTZ and Justices HANDLER, POLLOCK, O'HERN, GARIBALDI, and STEIN  6. Opposed  None.