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AS I SEE IT...

Your Clients are Entitled to a Trusted, Independent Adviser
Don’t Surrender Your Professional Responsibilities in Return for Referrals

by John G. O'Brien, ATG Vice President

I have a clear recollection of a telephone conversation I had several years ago with a local realtor who also managed the office of a local company where I had closed a lot of deals over the years. He announced he was the new manager of the affiliated title insurance agency his company had recently formed. He went on to say that if I expected to continue my relationship with the agents in his office, I needed to "get with the program," by agreeing to use the captive title company on any client referrals I received from that realtor. I declined and my stream of referrals from that company disappeared. I know many of you were invited to this same program with similar results.

Unfortunately, pressure from these companies for lawyers to surrender their professional responsibilities in return for referrals has only increased. The company referenced above rolled out yet another program. This time they presented a list of "local market expert attorneys" and said to their customers, if they retained a lawyer from this list, then (provided their affiliate got the title order) the real estate company would pay for the lawyer. Pay for the lawyer? Can you imagine?

Syndicated real estate columnist Kenneth R. Harney, writing in the Washington Post, October 21, 2015, stated: "Home buyers usually don't have a clue about the existence of under-the-table marketing kickback deals, and they can end up paying hundreds or thousands of dollars extra at closings as a result. But now the federal government's top consumer protection agency says that too many of the consumer referral games being played by some real estate brokers, mortgage lenders, and title companies are illegal and it plans to crack down on them." This problem is widespread.

Also, remember ISBA Opinion No. 10-02: "A lawyer may not enter into a referral arrangement with a real estate company that would require the lawyer to use the real estate company's affiliated title insurer for the lawyer's clients as a condition of receiving referrals from the real estate company." Further, the Real Estate Settlement Procedures Act (RESPA) rules state, "an agreement or understanding for the referral of business incident to or part of a settlement service need not be written or verbalized but may be established by practice, pattern or course of conduct. When a thing of value is received repeatedly and is connected in any way with the volume or value of the business referred, the receipt of the thing of value is evidence that it is made pursuant to an agreement or understanding for the referral of business." The referral of legal clients in exchange for title insurance business is a Federal crime. And the CFPB has a history of vigilance in enforcing these anti-kickback provisions.

So let me suggest a different program for you: Represent your clients. Be mindful of your professional responsibilities. Don't capitulate to these pay-to-play kickback schemes. Your clients are entitled to a trusted, independent adviser, be that guy—or gal. There are great real estate agents all over the state, determined to ensure their customers have a smooth closing and are well represented. Good real estate agents will gravitate to lawyers who protect their clients and provide great service. Know that ATG always has your back and that we are fighting these shenanigans locally and at the Federal level.

John O'Brien, ATG Vice President, has plenty of experience with issues near and dear to real estate lawyers. He spent the first 40 years of his career in the private practice, focusing mainly on real estate and estate planning. He became a member agent of ATG in 1984 and was consistently a top-issuer. He founded the Illinois Real Estate Lawyers Association (IRELA) in 1994 and was president of the ISBA from 2009-2010. He was elected to the ATG Board of Directors in 2002, and accepted his current position with ATG in 2012. He is a frequent lecturer for the ISBA, the CBA, numerous bar associations throughout the state, and the IICLE. He serves on the Board of Directors of the ISBA Mutual Insurance Company and is a member of the MCLE Board of the Supreme Court of Illinois where he serves as Chair of the Rules and Regulations Committee.

[Last update: 10-29-15]

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