UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 97-01
I have been approached by a potential seller of various lots and parcels of real estate who would like to structure the contract to encourage potential purchasers to use my firm for real estate closings. Accordingly, a structure is being proposed where if the purchaser of the seller's real estate will utilize my firm for both sides of the closing transaction and for title insurance, my client will pay for the attorney's fees and title insurance premiums associated with such representation. However, if any prospective purchaser intends to use any other attorney, then the purchaser will be responsible for the cost incurred with such other attorney. However, the contract will also provide that the purchaser shall pay for the state and county transfer fees associated with this transaction.
Questions:
1) Is this arrangement proper? 2) Would it be improper of me to recommend or promote that my real estate developer clients utilize such a contract?
Summary:
There is nothing wrong with the seller's paying your fee, so long as you comply with the requirements of Rule 1.8 (f), maintain any confidentiality under Rule 1.6, and any conflict is avoided under Rule 1.7. You may give any other clients you have such legal advice as you deem proper.
Opinion:
Rule 1.8 (f) expressly envisions situations wherein a lawyer may be paid by one other than the client. The requirements are clear:
(1) The client must consent after consultation. You must discuss the proposed arrangement with your client. You must explain the entire transaction. You must reveal your past or present representation of the Seller and discuss any possible conflicts. Obtaining consent in writing would be best.
(2) There must be no interference with you independent judgment on behalf of the purchaser or with your relationship with the purchaser.
(3) The confidentiality of the purchaser must be maintained.
All the requirements of Rule 1.7 must be met. You must reasonably believe that representation of the developer will not affect the relationship with the purchaser, and vice versa. Your representation of the purchaser must not be materially limited by any past, present or continuing obligation to the developer, or by your own interests. Consultation with the purchaser must include an explanation of the implications of the common representation and any advantages and risks involved. If any conflict arises, you should withdraw from representation of either party.
There is nothing per se improper concerning the proposed arrangement. Consequently, you may recommend such an arrangement to other developers you may represent if you believe it to be in their best interest.