ANNAPOLIS -- Title companies lost a preliminary battle yesterday in their fight to avoid a financial burden that currently is imposed on their competitors in the legal industry.
But a vote by the Senate Judicial Proceedings Committee on that issue and two others dealt a triple blow to private-sector legal programs for the poor.
A bill the committee passed would require title companies to relinquish the interest they earn from holding clients' escrow accounts while a building is being sold. If the interest earned is less than $50, the title companies traditionally keep the money, but lawyers are required by law and professional ethics to give that money to a legal-aid agency.
As originally drafted, the bill would have required the title companies to donate the escrow account interest to the Maryland Legal Services Corp., a non-profit company which funds legal programs for the poor. Last year lawyer donations to MLSC reached almost $5 million, and lawyers estimated this week that a similar program for title companies could generate $4 million to $7 million a year for MLSC.
The state bar association and others argued that because title companies do the same kinds of work as some lawyers, and because the escrow accounts are subject to the same potential abuses, both groups should be required to give up the escrow account interest.
But yesterday the committee accepted an amendment from Sen. John A. Pica Jr., D-Baltimore, that makes Baltimore City the recipient of the money instead of the legal services corporation.
The two other bills the committee passed would reduce the amount of money MLSC receives from two funding sources: the escrow account interest from lawyers and the state's abandoned property funds, the original funding source for MLSC.
One bill would divert the first $750,000 each year from lawyer escrow account interest away from MLSC and into the state's Public Defender's Office, specifically to represent defendants in cases involving the state's Child in Need of Assistance program.
The second bill would divert from MLSC $500,000 it receives from the state's abandoned property fund and send the money to the general fund.
Proponents of the bills argued at a hearing Wednesday that MLSC has a $2 million reserve fund and can afford to give up some of its money.
But some recipients of the corporation's grants argued that the state is required by law to fund the Public Defender's Office and should appropriate money to it through the normal channels.
"Here we're taking money from the non-profit sector to serve people who are not being served by the public sector, and we're using it for services the state is mandated to provide," said Amy Blank, a lobbyist for Advocates for Children and Youth Inc.