The New Jersey Supreme Court ruled in 1995 that title agents and brokers could legally conduct house closings with little or no lawyer involvement but would be subject to charges of unauthorized practice of law if they did not inform buyers and sellers that having a lawyer was advisable.

Now, nearly nine years later, a Superior Court judge seemingly has taken that one giant step further, warning they also could be violating the state's consumer fraud law and its hefty penalties if they don't flag the principals about potential legal problems involving the sale and reiterate the need for immediate legal representation.

Last month's decision involved a case in North Jersey but it could have its major impact in the southern reaches of the Garden State, where many closings for decades have been conducted without lawyers.

The plaintiff's South Orange lawyer, Andrew M. Moskowitz, suspects title companies and others involved in closings will be stunned by the decision of Hudson County Judge Carmen Messano. Violators of New Jersey's Consumer Fraud Act (CFA) face treble damages and fee-shifting.

It remains to be seen whether the ruling might sway realty agents and others, especially in South Jersey, to think twice before closing sans attorney.
When New Jersey Lawyer sought comment from those in the real estate community on Messano's ruling in Torres v. Harrison, it became apparent news of the case had not made the rounds.

Meredith Kaplan Stoma of Livingston, attorney for the title company in the case, said her view is the duties of title companies were addressed by the high court in 1995 and she doesn't think the latest decision adds much. She said, though, she's considering filing a motion for reconsideration.

But Moskowitz made clear he sees the ruling as most significant and probably the first key decision to spin off the high court's 1995 landmark In re Opinion 26 by tying it into possible CFA violations.

This will make title companies look up and take notice," he said. "The court applies Opinion 26 and finds that violation of the duties imposed by that opinion could constitute an unconscionable commercial practice" in violations of the CFA. Moskowitz said other than Torres he has found no previous decisions explicitly holding title companies accountable under the consumer fraud statute. To the chagrin of most lawyers at the time, Opinion 26 recognized the validity of the long-standing South Jersey practice of lawyer-free closings. It also enumerated the responsibilities of brokers, title officers and others at those closings to advise the parties of possible legal problems if they moved ahead without attorneys.

Like Moskowitz, Flemington attorney Lee B. Roth said he's unaware of any other decision putting those who oversee non-lawyer closings in jeopardy of violating the CFA.

Roth, who in 1995 was among those leading the New Jersey State Bar Association's challenge to South Jersey-type closings, said Messano's ruling clearly underscores the potential dangers of eliminating lawyers from the process. "I'm hoping it sends a message to title companies and brokers" reminding them of their responsibilities under Opinion 26, he said, contending those duties sometimes are eclipsed by the practical issues of completing the transaction. Essentially, Messano dismissed several claims and counterclaims for summary judgment in Torres except one. In that, he found title companies that fail to follow the mandates of Opinon 26 may find themselves in violation of the tough law designed to protect consumers.

In the case before Messano, Monica Torres entered into a contract to purchase property in Bayonne. A loan officer at the bank told her about Central Title Agency, and although she knew Central would not be her attorney, she expected the agency to handle and "walk her through" the closing. At closing, Torres signed a "limitation form" stating Central Title was not providing her legal advice and confirming she had chosen not to be represented by an attorney. Torres was not given the form to review prior to the closing and said she did not read it before she signed.

During the closing, Central's representative observed a dispute between Torres and the seller, William Harrison, who also was employed by the broker, Century 21, over a credit toward necessary repairs, but did not terminate or interrupt the closing to suggest Torres obtain counsel.

Torres sued Central, Harrison and Century 21 for the cost of repairing the property. This included $67,000 from Bayonne as a community development grant that must be repaid if Torres recovers damages, and $2,500 out-of-pocket expenses.

Denying Central's summary judgment motion to dismiss Torres' CFA complaint, Messano noted that under Opinion 26, "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." The broker has a duty to inform either party of need for counsel, states the opinion, adding, "Presumably, the same duty applies to any title officer ... who becomes aware of the need of either party for independent counsel." But according to Torres' version of events, Central failed to properly and timely advise her of the benefits of independent counsel either before or during closing, said Messano.

This record would "allow a reasonable fact-finder to conclude that Central violated the Supreme Court's definition of a title officer's duty," said Messano, and such a violation constitutes an unauthorized practice of law. This would constitute an "unconscionable practice," required for a violation of the CFA, said the judge.

The veteran jurist, though, made clear the merits of the suit must be decided by a jury and his ruling only addresses summary judgment.