WASHINGTON — A new federal court suit alleging kickback violations by one of the country’s top-producing real estate sales teams raises an unsettling question for homebuyers: Could your agent or broker be pocketing under the table large chunks of what you pay for title insurance?
Some legal analysts say the litigation should be a wake-up call for realty brokers and their customers nationwide. It focuses fresh attention on the often murky financial relationships that exist between title insurance agencies and realty firms — relationships that have been drawing increasing scrutiny from the federal Consumer Financial Protection Bureau.
The suit, which was filed in U.S. District Court in Baltimore earlier this month, alleges that the Creig Northrop Team P.C. — a real estate group ranked among the highest-grossing nationwide in recent years — received payments totaling $1.3 million between 2001 and 2014 from a title insurance company, which the complaint characterizes as illegal “kickbacks” that were never disclosed to buyers. The plaintiffs also allege that the defendants used “sham” employment and marketing agreements to disguise the true nature of the payments.
The Northrop team is affiliated with Long and Foster Real Estate Inc., the largest independent brokerage in the country. Timothy Casey, an attorney representing both the Northrop team and Long and Foster, said he had no comment on the case, pending authorization from his clients to do so. Lakeview Title Insurance Co., which allegedly paid kickbacks in exchange for referrals of business by the Northrop team, did not respond to a request for comment. The defendants’ answer has not yet been filed.
The filing seeks class-action status, $11.2 million in “compensatory damages” for the plaintiffs, plus potentially millions more in other damages. A related suit sought and was granted class-action status by the same federal court earlier this year. In that case, the Northrop team and Long and Foster denied any wrongdoing. The court ultimately dropped Long and Foster from the class action, having found no evidence that Long and Foster had participated in the Northrop team’s alleged actions.
The new suit, brought by Nancy Wade and Janice Rulli, who purchased a home in Ellicott City, Md., through the Northrop team, seeks to reinstate Long and Foster as a defendant with new allegations that an employee of the brokerage firm not only was aware of the allegedly illegal payments, but “admonished and disciplined” sales agents when they did not steer business to the title agency.
The complaint alleges that Carla Northrop, vice president of the team, received $775,000 from Lakeview Title over a six-year period under an “employment arrangement” that required little or no work — she had no office space, no set hours, no cellphone or business cards — yet was compensated with one-half of the title insurance premiums charged to home purchasers who were referred by the Northrop team.
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