New Jersey Department of Banking and Insurance Clarifies Restrictions on the Payment of Commissions, Rebates and Other Inducements by Title Producers



The New Jersey Department of Banking and Insurance ("NJDOBI") issued a Bulletin to title insurance companies and producers and to real estate brokers, broker-salespersons and salespersons advising them of the restrictions on commissions, rebates and other inducements. The Bulletin is an important reminder that in order to ensure that no violations of New Jersey's laws prohibiting inducements occur, companies should establish compliance policies and adopt procedures to review those policies with their employees.

On February 19, 2013, NJDOBI issued Bulletin No. 13-02 reminding not only insurance companies writing title insurance and title insurance producers, but also real estate brokers and salespersons of the statutory restrictions on the payment and acceptance of commissions, rebates and inducements.

NJDOBI's Bulletin notifies the regulated community that NJDOBI has, "… determined that certain payments by title insurance producers of room rental fees to real estate brokers or other licensees may violate N.J.S.A.17:46B-34, since the producer may be paying…. money as an inducement … to the real estate brokers…" for procuring title insurance with them. N.J.S.A. 17:46B-34 prohibits the payment, directly or indirectly, of any consideration as an inducement to procure title insurance.

The Bulletin also notifies all real estate licensees that receiving any type of compensation such as, ". . a room rental fee that exceeds the fair market value for the rental of comparable office space. . ." may be a violation of N.J.S.A.17:46B-35c which prohibits the receipt of compensation from a title company as an inducement to place title insurance.

Bulletin No. 13-02 is not the first time NJDOBI has advised the regulated community of its opinion regarding room rental fees. Commissioner Bakke issued Bulletin No. 02-29 advising that NJDOBI determined that receiving a room rental fee for the use of a title closing room which was higher than fair market value could be construed to be in violation of N.J.S.A.17:46B-35c.