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 97-19
Attorney's client, Seller, has requested that Attorney draft a sales contract to be used for the sale of condominium units which will include the following provision:
Purchaser and Seller acknowledge that Purchaser may use any law firm it desires to use in the closing of the purchase of its unit. Purchaser further acknowledges that at the completion of the building which contains the unit Seller must provide information for and attend numerous closings with several different law firms who represent the various purchasers in the building. These other law firms are generally not familiar with [Name of Project] and the issues which have to be addressed at closing. Purchaser also acknowledges that having to deal with several different law firms in this manner will increase Seller's cost through additional time and inconvenience to Seller in closing the sale of units. In order to compensate and reimburse Seller for this additional cost, Purchaser shall pay to Seller at closing the additional sum of $250.00 at closing. Provided, however, in the event Purchaser chooses to use the Seller's attorneys as its closing attorneys, Seller will waive this $250.00 in light of the fact that Seller's attorneys are more familiar with [Name of Project] and the issues which need to be addressed at closing.
Questions:
Is it ethical for Attorney to participate in the drafting of a contract containing this provision or to represent purchasers at the unit closings?
Summary:
Drafting the contract and representing the unit purchasers is not unethical, provided Attorney complies with Rule 1.7 before engaging in representation of multiple parties.
Opinion:
Seller is offering a financial inducement for condominium purchasers to use Seller's attorney as the closing attorney. Taking the contract provisions at face value, the underlying motive is that closings will occur more easily and smoothly if one attorney, Seller's attorney, handles all of them. If offering such an inducement were to violate any criminal statute, the attorney's involvement in drafting the contract arguably could be construed as a violation of Rule 8.4 of the Rules of Professional Conduct. Rule 8.4 provides in part that it is professional misconduct for a lawyer to commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects. Although this question is one of substantive law, the Committee is unaware of any statute that would prohibit the Seller offering such an inducement, and therefore Attorney would not violate Rule 8.4 by assisting Seller in drafting this provision of the contract.
We are assuming for purposes of this opinion that Attorney, who is drafting the contract, will be the closing attorney for the Seller and the purchasers at the unit closings (conceivably, Seller could have a second attorney which Seller uses for unit closings). Under these circumstances, Attorney will benefit from the financial inducement in the contract in that some purchasers presumably will use Attorney for closings instead of selecting another attorney. Under Rule 7.3(c), a written communication from a lawyer soliciting professional employment from a prospective client known to be in need of legal service in a particular matter, and with whom the lawyer has no family or prior professional relationship, must contain certain notices and disclosures as set forth in Rule 7.3(c). The facts raise the question of whether Attorney has violated Rule 7.3 concerning direct contact with prospective clients by participating in the drafting of a contract provision which Attorney knows will result in purchasers seeking representation from Attorney for unit closings.
We note that while the contract contains a financial inducement to use Seller's attorney, it is debatable whether a direct solicitation has actually been made by Attorney. The contract is between Seller and the unit purchaser; Attorney is not a party to the contract and is not named in the contract. Attorney has no assurances at the time the contract is drafted that Attorney will be designated by Seller as the closing attorney for the unit closings. Under these circumstances, the Committee's opinion is that the drafting of the contract does not constitute a direct solicitation subject to Rule 7.3.
We note that Attorney's acceptance of representation of the purchaser, when Attorney apparently will continue to represent Seller, is subject to the conflict of interest rules, specifically Rule 1.7. The issues raised by multiple representation in a real estate setting have been addressed in previous opinions of the committee. See, e.g., S.C. Bar Ethics Adv. Ops. # 95-04, 94-08, 91-30, 86-08, 86-09 and 78-16.
Also, if Seller will be paying Attorney's legal fees with respect to Attorney's representation of a purchaser, Attorney must comply with Rule 1.8(f).