CONTROVERSIAL ISSUE

SUMMARY: Title companies provide consumers with title insurance, conduct examinations to find defects or failure of titles to particular parcels of realty, and serve as escrow and settlement agents in real estate closings.

Among the membership of the MSBA, especially those lawyers who practice real property law, there are those who believe that many of the activities of title companies constitute unauthorized practice of law. Of specific concern to these attorneys are title company services that include: (1) conducting real estate closings without representation by attorneys; (2) preparing deeds and other documents affecting the title to real estate; (3) preparing lien instruments such as mortgages; and, (4) advising parties of their contractual rights under a contract of sale.

Unlike the legal profession which is regulated extensively through the Court of Appeals (Attorney Grievance Commission, State Board of Law Examiners, Clients' Security Trust Fund, Rules of Practice and Procedure), title companies and title agents are under the scope of the Insurance Commissioner, and, prior to 1995, had few specific regulations covering their activities.

The general provisions relating to all insurers contained within Article 48A of the Maryland Code, commonly referred to as the Insurance Code, also govern the activities of the title insurance companies. As such, title companies that do business within Maryland must receive authorization from the state, and their accounts, records, transactions, documents and offices are subject to examination by the Insurance Commissioner. There are requirements concerning the type and amount of assets and risk that must be retained by insurers. Additionally, the state has established certification qualifications common to all insurance agents.

The 1995 General Assembly significantly modified the regulation of the title insurance industry. News reports heightened public awareness of thefts from title company escrow accounts and the exemption given to lawyers from regulation by the Insurance Division. Under legislation that was approved, the Insurance Commissioner may refuse to certify title insurance agents and brokers who employ convicted felons in a fiduciary capacity. Additionally, bonding and continuing education requirements for title agents and brokers who are not lawyers have been stiffened, and financial oversight of the industry has been increased. Lawyers who sell title insurance must register with the Insurance Division but are exempt from all other licensing requirements unless they own a title company or work through title agents. A move to repeal this statute was thwarted in 1996.

Legislation passed in 1997 altered the method by which title company reserves are applied to contracts, but did not make changes in the basic regulatory structure of title companies. No effort has been made to overturn the Interest on Trust Accounts (IOTA) statute enacted in 1992 that requires title companies to distribute interest from their escrow accounts to the Maryland Affordable Housing Trust.

MSBA 2002 POSITION: Support legislation that will insure proper enforcement of the IOTA statute.

SAMPLE LEGISLATION: None.

Return to 2002 Final State Legislative Program Table of Contents

Back To Top