Can a lawyer who also owns a real estate company close a sale developed by that company for a customer the lawyer already represented?

Plain-English summary

A lawyer who was also a licensed real-estate broker held an interest in a real-estate sales company located in the same suite of offices as his law practice. He asked whether, assuming a proper referral with full disclosure had taken place from the law practice to the real-estate company, the law firm could close the sales contract the real-estate company developed.

The Disciplinary Commission concluded that if the law client requests it, the lawyer may ethically close the sales contract developed by his real-estate company. The opinion drew the line on the direction of the referral. A lawyer may engage in a separate profession so long as it is not used as a cloak for solicitation, and may refer his own clients to a business he operates with full disclosure of his interest. The converse is not permitted: the lawyer's non-legal business cannot refer customers to him for legal services, because the business is not itself barred from directly soliciting customers, so the lawyer cannot solicit law-practice clients through his separate business. Accordingly, the Commission stated, the lawyer could not accept a referral from the real-estate company to close a contract for a real-estate customer he had not previously represented. But where he originally represented the customer as his attorney and referred that customer to the real-estate company with full disclosure of his interest, he may handle the closing on the client's behalf, because the pre-existing attorney-client relationship removes the dangers of solicitation.

Currency note

This opinion was issued in 1987, under the former Alabama Code of Professional Responsibility (temporary DR 2-103) and before the Alabama State Bar's January 1, 1991 adoption of the Rules of Professional Conduct and the 2002 Ethics 2000 revisions to the ABA Model Rules. A lawyer's law-related (ancillary) business is now governed by Rule 5.7, and solicitation by Rule 7.3. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer who owns a real-estate company close sales that company arranges?

A: Per the opinion, the lawyer may close the sale only where he originally represented the customer as a client and referred that client to the real-estate company with full disclosure of his interest.

Q: Why does it matter who came to whom first?

A: The opinion concluded a lawyer may refer his own clients to his separate business with disclosure, but the separate business may not refer customers back to the lawyer for legal work, because that would let the lawyer solicit clients through a business not barred from soliciting.

Q: What if the lawyer never represented the real-estate customer before?

A: The opinion concluded the lawyer could not accept a referral from the real-estate company to close a contract for a customer he had not previously represented, because the solicitation danger would be present.

Background and rules framework

The opinion interpreted the former Alabama Code of Professional Responsibility's solicitation provisions (temporary DR 2-103), as applied to a lawyer who simultaneously operates a separate, non-legal business. A lawyer's law-related business is now addressed by Rule 5.7, and solicitation by Rule 7.3.

Citations and references

Rules of Professional Conduct:

• Former Ala. Code of Prof. Resp. temporary DR 2-103 (no solicitation for pecuniary gain); now Model Rule 7.3
• Concept of a lawyer's law-related business now addressed by Model Rule 5.7

Other opinions cited:

• RO-86-15 (a lawyer may engage in a separate profession; non-legal business may not solicit for the law practice)

See also

• AL Ethics Op. 1987-158: collection referrals from a lawyer-owned credit bureau
• AL Ethics Op. 1989-99: representing both buyer and seller in a real-estate transaction
• AL Ethics Op. 2001-01: bartering legal services in exchange for other services

Source

• Landing page: https://www.alabar.org/office-of-general-counsel/formal-opinions/1987-161/
• Original PDF: https://www.alabar.org/assets/2019/02/RO-87-161.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

ETHICS OPINION

RO-87-161

QUESTION:

"I have an interest in a real estate sales company located in the same suite of offices as my law practice. I am a licensed real estate broker. Assuming that an ethically proper referral with full disclosure took place from the law practice to the real estate company, can the law firm close the sales contract developed by the real estate company?"

ANSWER:

If your law client requests that you close the sales contract developed by your real estate company, you may ethically do so.

DISCUSSION:

It is well established that an attorney may engage in a separate profession so long as that profession is not used as a cloak for solicitation. An attorney may ethically refer clients to a separate business operated by the attorney so long as full disclosure is made to the client of the attorney's interest in the business. The converse is not true, however. An attorney's non-legal business cannot refer customers to the attorney for legal services, as the business is not prohibited from direct solicitation of customers. In other words, an attorney cannot solicit customers for his law practice through his separate business. See RO-86-15. Thus if you had not previously represented a customer of your real estate company, you could not accept a referral from the company to close the sales contract for the company's customer. However, where you originally represented the customer as his attorney and referred the customer to your real estate company with full disclosure of your interest in the company, you may handle the real estate closing on your client's behalf. Your pre-existing attorney/client relationship with the customer removes the dangers of solicitation.

HLW/vf

1-29-88