If you have ever practiced law, you’ve experienced that one crazy, busy week where so much was going on that an important, but not urgent, task got pushed to the back burner. Most of us have had such a task slip completely out of our consciousness for longer than we would care to admit.  These are the things that make us sit upright in bed at 2:00 A.M. Isn’t the practice of law fun? 

Real estate practice, perhaps more than any other area of the law, involves countless small but vital tasks that must be taken care of after the closing table has been left behind. Some of these tasks are obviously urgent such as timely recording documents and sending out disbursements. Other matters, such as pursuing releases or delivering the final title policy to the insured, may seem less urgent.  Well, the South Carolina Supreme Court recently issued a disciplinary opinion that should be a reminder that failing to follow through on the latter categories can still put a license at risk.   

According to the Court’s opinion, the attorney who was disciplined operated a solo law practice that handled at least some real estate closings. In connection with a commercial closing, the attorney collected $10,803.00 in title policy premium and attorney’s fees. During a particularly busy time, their practice forgot to issue the title policy following closing. As the attorney began closing the practice and moving to inactive status, the title policy remained outstanding and was never issued. However, her client did not forget.  The client’s attempts to contact the attorney about the status of the policy went unanswered.   The result was a complaint and the ensuing disciplinary action. 

In reviewing the case, the Court noted the attorney’s failure to produce the title policy and failure to respond to the client constituted violations of Rules:1.3 (diligence), 1.4 (communication), 1.15(a) (safekeeping of client property), 1.16(d) (return of client property), and Rules 8.4(a) and 8.4(d) of the Rules of Professional Conduct. 

This opinion reminds us that the title insurance premium in a real estate transaction comes from client funds. An attorney may serve as both the settlement agent and the title insurance agent in the same transaction. When that occurs, disbursing the title insurance premium before issuing the promised policy raises concerns about the attorney’s obligations to properly handle client funds and complete the representation. 

My experience working for a title insurance underwriter has been that most insureds are reasonably patient with the delivery of title policies, but that patience disappears when they do not receive timely responses from counsel. Lenders generally get very demanding when they realize that title policies are missing from their file at audit times, because FNMA/FHLMC guidelines may dictate financial consequences to the originating lender or servicer. A lender often contacts the attorney and then the title insurance company seeking production of the policy, but their next step is often the filing of a Bar complaint. 

In this disciplinary action, the Supreme Court publicly reprimanded the inactive attorney.   The Court required restitution be made to the client for the title premium and attorney’s fee and to reimburse ODC for its fees and costs. The Court further required that the attorney complete Ethics School before returning to active practice. 

For the full opinion, click here: 

https://www.sccourts.org/media/opinions/HTMLFiles/SC/28351.pdf