"Just say no" - Nancy Reagan, 1984

Lawyer Admonished: Penalty for an Attorney Whose Client Waited 15 Years for Escrowed Funds

Definitions:

Escrow: A deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition. – Merriam Webster Dictionary

Escrow: Thanklessly working for free after a closing, and withholding a sum of money, with both sides tugging at the purse strings, and doing nothing to entitle either party to the escrow money, and eventually leaving both sides upset with you, a person who is supposed to have no skin in the game as to who is entitled to the escrow money. – Vincent J. Gallo, Esq.

What’s this all about? My opinion? Read the synopsis of the Decision below. And again, this is only my opinion.?I suspect that the four (4) title defects raised were appropriately and timely raised in the Title Report, the closing was scheduled, and the four (4) title defects were not timely and appropriately attended to and disposed of before the closing was scheduled, and everyone, including the Seller’s Attorney, were now scrambling on the day of the closing as to what to do in order to prevent the closing from having to adjourn.

The solution? The Seller’s Attorney then volunteered to allow for a $10,000.00 escrow to be held, pending the Seller’s Attorney then taking on the un-compensated personal obligation to timely dispose of all four (4) of these title objections.

The result in doing so? See below:

"You had an ethical obligation to promptly complete the work. Your misconduct deprived your Client of his money, for 15 years," the Disciplinary Review Board said in a Letter Decision to the Attorney.

The Supreme Court of New Jersey has disciplined an Attorney whose Client had to wait 15 years for the release of escrowed funds from a home sale. The Court issued a Letter of Admonition to the Attorney for his handling of a Client’s Residential Real Estate sale. The Client hired the Attorney in 2005 with residual and collateral instructions to resolve four (4) title issues that prompted the Title Company to put $10,000.00 of the sales proceeds in escrow. After 13 months, the Attorney resolved three (3) of the title issues, but failed to resolve the fourth item, which was the discharge of an outstanding Mortgage. The case then languished until 2017 without the Attorney taking any significant steps to resolve the Mortgage Discharge issue that continued to blemish the property title, the Disciplinary Review Board (the “DRB”) said. In 2017, after the Attorney obtained assistance from another Attorney, that Attorney resolved the outstanding Mortgage issue by obtaining a Discharge, the DRB said. After that, in 2020, the Title Company returned the escrowed funds to the Seller,?but first it deducted approximately $5,000.00 in legal fees, the DRB said. The original Attorney said that he became ill in 2012, interfering with his ability to practice law, but the record showed no communication with the Client or performance of any work related to the representation, the DRB said. And despite the onset of health problems, the Attorney remained the Client’s Counsel, despite performing no work, the DRB said. The DRB found that the Attorney violated rules of professional conduct proscribing gross neglect, lack of diligence, failure to communicate with a Client and failure to explain a matter to the Client to the extent reasonably necessary. “Having agreed to represent the Client post-closing and, having undertaken affirmative steps to remove the exceptions to clear title pursuant to that representation, you had an ethical obligation to promptly complete the work. Your misconduct deprived your Client, for fifteen years, of the funds that remained in escrow pending clear title. Further, your misconduct deprived the Purchaser of clear title to his property,” the DRB said in a Letter Decision to the Attorney. The DRB?told the Attorney in its Letter Decision that?only an Admonition was imposed based on “considerable mitigating weight to your lack of discipline in nearly forty years at the Bar.” But it also said he would have to provide the Office of Attorney Ethics proof of his fitness to practice Law, as attested to by a medical doctor, within sixty (60) days of the issuance of its directive. The Attorney was self-represented in the Disciplinary Case.

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What does this tell you????

As an Attorney representing a Seller, if a Title Report discloses Title Objections that are not those found in the ordinary course of a real estate sale, and are historical in nature, which pre-dated your representation of a Seller, such as prior open Mortgages, or proof of death of a predecessor in title,?for example, stop, take a deep breath, and ask yourself: “Do you have the capacity, the inclination, the ability and/or the wherewithal to effectively and timely dispose of these Title Objections?” If the answer is no, then don’t take on tasks that you are unable or unwilling to effectively complete.?Keep in mind, if you weren’t complicit in creating these historical title objections, then they should be separated and distinctly identified as not occurring in the ordinary course of a real estate closing. As in this instance, perhaps the Client was better inclined to bring on someone else to attend exclusively to the historical tasks at hand, and the Closing Attorney should have passed the baton.

And why? Look what happened here. The Client was, no doubt, unhappy with his Closing Attorney, the Closing Attorney, no doubt, wasn’t additionally compensated for the additional work that was required in order to dispose of these historical title objections, nor did the Client ever expect to pay more in legal fees, if the problems only arose at the closing table, and in the end, the Closing Attorney received a Letter of Admonition, that could have been easily avoided.

Accordingly, there are three (3) interchangeable solutions: 1) Be certain that your Retainer Agreement clearly identifies that your legal fee for the Real Estate Closing does not include the disposition of matters that do not occur in the ordinary course of a Real Estate Closing; and 2) Identify with everyone as early as possible in the transaction those Title Objections that are historical, and not an ordinary part of a Real Estate Closing; and 3) In the words of Nancy Reagan: “Just say no” if you’re simply not up for the job of taking on this task!!!!