Who Actually Does What at the Real Estate Closing Table?

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When it comes to real estate transactions, it might seem like there are a lot of moving parts.  More than likely, you’ve started with a real estate agent and mortgage company representative.  There are other people involved in between, such as home inspectors and even local government officials.  In some cases, you may not even realize that a title company is also a part of your real estate purchase or sale.  So, do all of these individuals come to the closing table?  What are the responsibilities of the participants?

Before we go further, it goes without saying that you should have an experienced real estate lawyer representing you whenever you close a real estate deal.   Some areas of the country and even limited parts of New Jersey use title agencies for real estate transactions.  However, this is a rare exception in Central and North Jersey.  As a matter of fact, title officers acknowledge that they cannot provide legal advice and refer clients to attorneys.

On Monday, the New Jersey Appellate Division heard oral argument on a case regarding procedures used in real estate closings.   The New Jersey State Bar Association (NJSBA) filed an amicus brief in response to the court’s invitation to do so.   You may find the presented arguments of interest as we wait for the Appellate Division to submit its legal opinion.

Duties at the Real Estate Closing Table

The facts presented in the Bar Association’s brief are limited as they rely on those submitted by the plaintiff and defendant.  Marco Bianchi brought a claim against a number of parties who were involved in closing his real estate purchase.  Among them, was the title company and plaintiff’s legal counsel.

Mr. Bianchi asserted that his real estate attorney breached his duty to him by failing to provide advice concerning the purchase of homeowners insurance.  The alleged failure resulted in a legal malpractice claim.  The court dismissed the suit after determining the lawyer did not have a duty to advise the client about homeowners’ insurance absent an express agreement to do so.

This should bring you to the first question.  Are there legal requirements for homeowners insurance in New Jersey?  The short answer is no.   However, that’s not to say that mortgage lenders won’t insist on it.  Therefore, this generally only becomes an issue in cash transactions.

According to the brief submitted by the Bar Association, federal regulations regarding real estate transactions have limited the role of attorneys at the closing table.  Their duties most often include:

  • Reviewing and providing legal advice regarding the sales contract
  • Negotiating necessary repairs on the property
  • Preparing and reviewing title documents

In the meantime, title agencies have their own responsibilities as part of the settlement process.  They not only collect and disburse funds.   Title agencies actually prepare closing disclosure statements, often in conjunction with mortgage lenders.  Real estate attorneys do not participate in the preparation of the documents or even see them prior to closing.

Trial Court Findings Regarding Attorney Duties

When the lower court heard the case, plaintiff’s attorney attempted to offer expert testimony concerning the individual roles at the closing table.  The selected expert was another real estate lawyer. prepared to testify on his own routine practices.  However, the trial court determined that the opinion was more subjective than objective.

During the hearing, the court barred the expert’s testimony.  The judge determined that one attorney’s practices did not establish a standard of care expected from all practitioners.  At the conclusion of the case, the trial court ruled that the real estate attorney did not have a duty to counsel a real estate buyer regarding the purchase of homeowners’ insurance.

In submitting its brief to the Appellate Division, the New Jersey State Bar Association asserted that there was no legal authority obligating real estate attorneys to counsel their clients on homeowners’ insurance.  In short, “securing insurance has nothing to do with the law or the client’s ability to purchase a piece of property.”

The Bar Association opened up the question concerning  the extent of attorney responsibilities in protecting  home buyers.  For example, should real estate attorneys become involved in suggesting home alarm systems?  What about warranties for home appliances?

One of the reasons the case was appealed was because of the barring of plaintiff’s expert’s testimony.   The NJSBA concurred with the trial court’s decision.   The personal practices of one attorney did not constitute the “parameters of the professional standard of care …by others engaged in the general practice of law.”

It will be interesting to see if the New Jersey Appellate Division affirms the decision of the trial court.   Like other professionals involved in the closing process, lawyers play a particular role.

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Need legal advice concerning a real estate purchase or sale?  Contact us at the Law Offices of Lawrence M. Centanni to learn how we can help you.

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