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Settlement Charges Revisited

As discussed in Title Talk No. 91 (Winter 2014-15), earlier this year the New Jersey Land Title Insurance Rating Bureau [“NJLTIRB”] received approval of the Department of Banking & Insurance [“DOBI”] for certain changes to the Rate Manual concerning settlement charges, effective on April 1, 2015. Rate Manual §1.9 has been amended to reflect a revision in the explanation of the term settlement, which now includes “closing- or settlement-related functions performed both before and after the occurrence of the closing or settlement itself”. However, no settlement charge may be imposed for those functions covered by Rate Manual §7.1 (“Service Charges”). Pursuant to Art. 6 of the Rate Manual, where settlement services are provided, the charges for same are not optional, but mandatory.

Rate Manual §6.1 (“Settlements with Disbursements”) has been revised to set the initial settlement length, for which the minimum settlement charge of $300.00 (for settlements held at the agent’s office during normal business hours) is imposed, at 60 (formerly 90) minutes. And §6.2.3 (“Settlements of Greater than Normal Length”) is revised to provide that when a settlement with disbursements exceeds 60 minutes in length, an additional charge of $100.00 (formerly $25.00) is imposed for each additional hour (or fraction thereof) in excess of the initial 60-minute period.

Rate Manual §6.3 (“Settlements without Dis- bursements”) has been revised to set the initial settlement length, for which the minimum settlement charge of $150.00 is imposed, at 60 (formerly 90) minutes. Section 6.4.3 (“Settlements of Greater than Normal Length”) is revised to provide that when a settlement without disbursements exceeds 60 minutes in length, an additional charge of $50.00 (formerly $25.00) is imposed for each additional hour (or fraction thereof) in excess of the initial 60-minute period.

Section 6.4.4 (“Settlements of Greater than Normal Length; Itemization of Charges”) provides that whenever a settlement (with or without disbursements) of greater than normal length occurs, the insurer or agent must provide the applicant (upon request) with an itemization of the time expended. The same must include settlement-related functions performed both pre-and post-settlement. Many title insurers (including FNTG) have therefore recommended that their respective direct operations and agents keep records of the time spent on settlement-related activities for each file in the event an itemization of charges is requested.

An example illustrating the operation of §6.2.3 has been added to the Appendix portion of the Rate Manual. In this hypothetical situation, an agent conducts a settlement with disbursements, which is held at the agent’s office during normal business hours. One hour is spent at the table preceded by one hour in preparation time. Thus, the settlement charge is $400, computed as follows: $300 for the hour spent at the table (in accordance with §6.1) plus $100 for the hour spent in pre-settlement-related functions (in accordance with §6.2.3).

It should be noted that the additional charges imposed for pre- and post-settlement-related functions under Rate Manual §§ 6.2.3 and 6.4.3 are separate and distinct from those permitted under §3.1.5(c) (“Right to Impose Special Charges”). Therefore, the title company may not charge $100.00 for pre-settlement¬related functions under §6.2.3, and then charge an additional sum for the same activities under §3.1.5(c). As discussed in Title Talk No. 92 (Spring 2015), whenever a special charge is imposed under §3.1.5, a form entitled Consent to Special Rate or Charge must be signed by the applicant in accordance with §3.1.5(d). The Consent to Special Rate or Charge form should not be used simply because the settlement fee includes charges for settlement-related activities imposed under Rate Manual §§ 6.2.3 and 6.4.3. The form is applicable only where the title company seeks to impose fees which are not covered by those sections.

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