Title insurers are used to being real estate’s schmoozers-in-chief. New rules will change that

Title insurers are used to being real estate’s schmoozers-in-chief. New rules will change that

The Real Deal. Written by E.B. Solomont.

Title insurers are used to being real estate’s schmoozers-in-chief. New rules will change that

Industry bracing for stricter regulations on meals, tickets and parties

Guess who’s coming to dinner? No one.

If you could tune out the clinking glasses and the mutual pats on the back at Cooper-Horowitz’s annual bash at Michael Jordan’s steakhouse this week, you might have witnessed an unusual sight: Title insurance players looking anxious, huddled in a corner and discussing upcoming regulations that would change their business as they know it.

New state rules which take effect Dec. 18 aim to crack down on bad actors in the title insurance industry and will put a harsh spotlight on how firms spend their marketing dollars to win business. In order to curb inducements and excessive marketing, they prohibit title companies from offering clients (or prospective clients) meals and beverages, entertainment, outings, vacations or parties. How they will actually work is anyone’s guess, but what’s clear for now is they’ve got people spooked.

“Everyone in the industry is completely tied up in furious knots over this,” said one title executive, who spoke on condition of anonymity. “There is so much angst — and anger — over these regulations.” The level of detail in the regulations is unprecedented, he added. “I mean, there are virtually no entertainment expenses of any sort that are allowed.”

Title insurance is an opaque industry, even by the standards of real estate, and some players are notorious for going all-out to win business, wining and dining clients and potential clients with parties, trips, and tickets. The state has made numerous attempts over the years to curtail so-called “inducements,” but actual enforcement from Gov. Andrew Cuomo’s office has been lax, allowing for firms to go about business as usual.

The latest effort, however, is being taken seriously. After years of being the life – and hosts – of the party, leaders in the industry are trying to keep a low profile, which means that the VIP boxes at Madison Square Garden, Yankee Stadium and the Barclays Center, though already paid for, will remain empty for the foreseeable future. In addition to the marketing ban, a provision will also require underwriters to comply with certain transparency requirements — or be forced to reduce their rates by 5 percent.

“To me, this is unconstitutional,” said Adam Leitman Bailey, a real estate attorney who frequently works with title insurance companies. “You can’t limit the ability of a business to bring in more business.” Sure, there are bad apples, he said, as with any industry, but “I don’t think giving out tickets is shady. Taking a client out to lunch and dinner — those are things that every business in America does. Why are they taking it away from title companies?”

 

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