Can a California lawyer who is also a licensed real estate broker act in both roles in the same real property transaction for a client?

Currency note

This opinion was issued in 1982, before the State Bar of California's adoption of the November 1, 2018 revisions to the Rules of Professional Conduct. It interprets former Rules 2-101, 2-107, 2-111, 3-102, 4-101, 5-101, and 5-102, areas now addressed by Model Rules 1.7, 1.8, 1.6, and 5.4 and the corresponding California Rules. 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 Treat this page as historical context, not current guidance.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, statute, or requirement mentioned here.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the State Bar of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

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Plain-English summary

The committee was asked whether a lawyer who is also a licensed real estate broker may act in both capacities for a client buying real property, under a fee arrangement that paid a broker's commission if the deal closed or the lawyer's usual hourly rate if it did not. It concluded that the dual occupation is not unethical, but the analysis turned on the principle, drawn from ABA Opinion 328, that where a second occupation is so law-related that the lawyer's work inevitably involves the practice of law, the lawyer is held to State Bar standards while pursuing it. Because the activities of a real estate broker are law-related, the committee reasoned, the attorney-broker must conform to the Rules of Professional Conduct in all aspects of the broker work.

The committee identified that qualification as a substantial one and walked through the constraints it imposed. On confidentiality, it noted the tension between the broker's statutory duty to disclose information to other parties (for example, a buyer's payment history under Business and Professions Code section 10232.5) and the lawyer's duty under section 6068(e) to preserve client secrets, and observed that the attorney-broker can be caught between the two; it suggested the conflict might be addressed by advising the client of the potential conflict and obtaining a written waiver of confidentiality as to information the broker is legally obligated to disclose. On loyalty, it applied former Rules 4-101 and 5-102, concluding that representing both buyer and seller would be difficult to do while avoiding the appearance of impropriety, though California cases permit dual representation with full disclosure and informed consent.

On the proposed fee arrangement, the committee concluded the contingent broker's commission versus hourly fallback was not objectionable under former Rule 2-107 because the overall arrangement was advantageous to the client, but it created an adverse interest (the lawyer earns far more if the deal closes) that had to be disclosed and consented to under former Rule 5-101. On fee-splitting under former Rule 3-102, it concluded the rule was not violated when the attorney-broker acted for the buyer, but was more troublesome when acting for the seller, because the commission would then be paid in part for legal services. The committee concluded that a lawyer acting in both capacities for a buyer may do so within State Bar standards, but a lawyer doing so for a seller is likely to encounter great difficulty and a substantial possibility of violating the rules, and it cautioned that even a written Rule 5-101 waiver may not be effective.

Common questions

Q: Can a California lawyer also work as a real estate broker on the same deal for a client?

A: Yes. The committee concluded it is not unethical to pursue the dual occupations of lawyer and real estate broker in acquiring real property for a client, so long as both professions are pursued within State Bar standards.

Q: Why does the lawyer's ethics duties follow into the broker work?

A: Because the committee applied ABA Opinion 328's principle that a second occupation so law-related that it inevitably involves the practice of law holds the lawyer to bar standards while conducting it, and it found real estate brokerage to be law-related.

Q: Was the commission-or-hourly fee arrangement allowed?

A: The committee concluded the arrangement was not objectionable under former Rule 2-107 because it was advantageous to the client, but it created an adverse interest that had to be disclosed and consented to in writing under former Rule 5-101.

Q: Is it harder to fill both roles for a seller than for a buyer?

A: Yes. The committee concluded that acting as attorney-broker for a buyer can be done within bar standards, but doing so for a seller raises a substantial possibility of violating the rules, including the fee-splitting prohibition in former Rule 3-102.

Background and rules framework

The opinion interprets former Rules 2-101 (professional employment and advertising), 2-107 (fees), 2-111 (withdrawal), 3-102 (sharing fees with nonlawyers), 4-101 (accepting employment adverse to a client), 5-101 (avoiding adverse interests / business transactions with a client), and 5-102 (avoiding representation of adverse interests) of the California Rules of Professional Conduct, together with Business and Professions Code section 6068(e). These areas are now addressed by Model Rules 1.7 (conflicts), 1.8 (business transactions with a client), 1.6 (confidentiality), and 5.4 (professional independence / fee-splitting) and their California counterparts.

Citations and references

Rules of Professional Conduct:

• Former California Rule 2-101 (professional employment)
• Former California Rule 2-107 (fees for legal services)
• Former California Rule 2-111 (withdrawal from employment)
• Former California Rule 3-102 (financial arrangements with nonlawyers)
• Former California Rule 4-101 (accepting employment adverse to a client)
• Former California Rule 5-101 (avoiding adverse interests)
• Former California Rule 5-102 (avoiding the representation of adverse interests)

Statutes:

• Business and Professions Code section 6068, subdivision (e) (duty to preserve client secrets)
• Business and Professions Code sections 10133, 10153.4, 10232.5 (real estate broker licensing and disclosure)

Cases:

• Libarian v. State Bar of California (1944) 5 Cal.2d 314 [153 P.2d 739], censure for advertising multiple lines of services
• Bates v. State Bar of Arizona (1976) 433 U.S. 50, constitutional protection for lawyer advertising
• Ohralik v. Ohio State Bar (1978) 436 U.S. 447, in-person solicitation
• In the Matter of R.M.J. (1982) 455 U.S. 191, limits on advertising restrictions
• Provisor v. Haas Realty (1967) 256 Cal.App.2d 850, attorney could not collect broker's fees without a broker's license
• Anderson v. Thatcher (1946) 76 Cal.App.2d 50 [172 P.2d 533], dual agent's duty of disclosure
• Maxwell v. Superior Court (1982) 30 Cal.3d 606, client waiver
• Watt Industries, Inc. v. Superior Court (1981) 115 Cal.App.3d 802, work product where attorney acted as business agent
• Klemm v. Superior Court (1977) 75 Cal.App.3d 893 [142 Cal.Rptr. 509], dual representation with disclosure and consent
• Bushman v. State Bar (1974) 11 Cal.3d 558 [113 Cal.Rptr. 904], unconscionable fees

Other opinions cited:

• ABA Committee on Ethics and Professional Responsibility, Opinion 328 (1972): standards for lawyers in law-related occupations
• ABA Informal Opinion 1314 (1975): client about to commit perjury
• Los Angeles County Bar Association Committee on Legal Ethics, Opinion 384 (1980): conflict risk for attorney-broker

See also

• CA Ethics Op. 1999-154: Dual Practitioner Lawyer and Investment Advisor
• CA Ethics Op. 1981-62: Promissory Notes and Security Interests for Fees
• CA Ethics Op. 1981-55: Lawyer as Surety on a Client's Bond

Source

• Landing page: https://www.calbar.ca.gov/legal-professionals/ethics-compliance-practice-resources/ethics/ethics-opinions
• Original opinion: https://www.calbar.org/ethics/Opinions/1982-69.htm

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

THE STATE BAR OF CALIFORNIA

STANDING COMMITTEE ON PROFESSIONAL RESPONSIBILITY AND CONDUCT

FORMAL OPINION NO. 1982-69

ISSUE:

May an attorney who is also licensed as a real estate broker act in both capacities on behalf of a client in connection with the purchase of real property? If an attorney may act in both such capacities, is it ethically proper for the attorney to enter into a fee agreement with the client whereby the attorney is compensated by either sharing in the real estate broker's commission if the transaction is consummated or at the attorney's usual hourly rate if the transaction is not consummated?

DIGEST:

An attorney may ethically act as an attorney and licensed real estate broker in the same transaction. However, the attorney must at all times conform to the standards of both professions and, to the extent that those standards are in conflict, the attorney must at all times conform to the standards of the State Bar of California. As a result, there are substantial risks for the attorney/broker.

AUTHORITIES INTERPRETED:

Rules 2-101, 2-107, 2-111, 3-102, 4-101, 5-101 and 5-102 of the Rules of Professional Conduct of the State Bar of California.

Section 6068, subdivision (e), of the California Business and Professions Code.

DISCUSSION

The Committee has been asked whether an attorney may act in a dual capacity as both attorney and licensed real estate broker in connection with the purchase of real property for a client under a fee arrangement which provides for compensation as a broker if the transaction is consummated, or, alternatively, compensation at the attorney's "usual hourly rates" if the transaction is not consummated. The attorney seeks to comply with the terms of rule 5-101 of the Rules of Professional Conduct (avoiding adverse interests) by means of a written agreement in which the client expressly waives the attorney's adverse interest which results from the dual nature of the relationship.

BACKGROUND:

Historically, attorneys have been prohibited from engaging in dual occupations, at least where both are practiced out of the same office. While myriad reasons have been advanced condemning second activities of lawyers, the major concern was that attorneys might use the non-lawyer occupation as a basis for advertising and solicitation, with the rendering of non-lawyer services acting as a "feeder" of clients for the law practice. See, for example, Libarian v. State Bar of California (1944) 5 Cal.2d 314 [153 P.2d 739], involving censure for signposts at the attorney's office listing three lines of services (law, income tax preparation, and notary public). See also former rule 2-104 of the Rules of Professional Conduct (repealed in April, 1979) and former American Bar Association Code of Professional Responsibility, Disciplinary Rule 2-101(e) (repealed in 1980).

The rationale for the historical prohibition of dual occupation has been undercut by the increased constitutional protections afforded lawyers who wish to advertise their services. (See Bates v. State Bar of Arizona (1976) 433 U.S. 50; Ohralik v. Ohio State Bar (1978) 436 U.S. 447; and In the Matter of R.M.J. (1982) __ U.S. ___ [102 S.Ct. 929].) The ethical problem of an attorney's functioning in dual professional or occupational capacities were not addressed directly in the earlier disciplinary cases, because the analysis of those cases stopped at the "advertising" issue.

The inquirer asks specifically about the ethics of an attorney functioning in the combined role of broker and lawyer, apparently on behalf of a prospective buyer-client. Clearly brokers and lawyers engage in overlapping and closely related functions. Indeed, California Business and Professions Code, section 10153.4, requires evidence of satisfactory completion of a three-semester unit course in the legal aspects of real estate law unless the applicant for a broker's license is a member of the California State Bar. California law thus implicitly recognizes an attorney acting as a real estate broker as an ethical combination of pursuits. See also Business and Professions Code, section 10133, and Provisor v. Haas Realty (1967) 256 Cal.App.2d 850, holding that an attorney acting as a real estate broker was not entitled to collect broker's fees unless the attorney also was a licensed real estate broker.

It also must be recognized that potential clients of the attorney-broker may be sophisticated parties, such as developers, investors or entrepreneurs, either individuals or group entities. For such clients, the services of an attorney-broker may be extremely valuable, providing needed expertise and cost-efficient delivery of professional services in a legally complex area.

Accordingly, we conclude that it is not unethical for an attorney to engage in the dual occupations of attorney and real estate broker in connection with the acquisition of real property on behalf of a client. However, attorneys are cautioned that the practice of dual occupations does create an increased risk of a violation of the Rules of Professional Conduct. As was stated in American Bar Association, Committee on Ethics Professional Responsibility, opinion No. 328, supra:

"It may be impossible to know whether the lawyer's work for another person is performed as part of the practice of law or a part of his [sic] other occupation or profession ....

"In carrying on law-related occupations or professions the lawyer almost inevitably will engage to some extent in the practice of law, even though the activities are such that a layman can engage in them without being engaged in the unauthorized practice of law...

"If the second occupation is so law-related that the work of the lawyer in such occupation will involve, inseparably, the practice of law, the lawyer is considered to be engaged in the practice of law while conducting that occupation. Accordingly. he is held to the standards of the bar while conducting that second occupation." (Emphasis added.)

The activities of a real estate broker are clearly "law related" as contemplated by American Bar Association, Committee on Ethics and Professional Responsibility, opinion No. 328, supra, and an attorney who is acting as a real estate broker in the same transaction must conform to the standards of the bar and the Rules of Professional Conduct in all aspects of such activities.

The qualification just stated is a substantial one, and imposes very real ethical constraints for attorneys pursuing dual professions. For example, an attorney has a duty under Business and Professions Code section 6068, subdivision (e), to maintain inviolate the confidences and preserve the secrets of the client. An attorney has a duty of loyalty to his or her client and may be treated as a fiduciary even though the relationship of others in the second profession is not that of fiduciary; see rule 4-101 of the Rules of Professional Conduct (accepting employment adverse to a client), rule 5-101 of the Rules of Professional Conduct (avoiding adverse interest) and rule 5-102 of the Rules of Professional Conduct (avoiding the representation of adverse interests). Fees set by the lawyer must conform to requirements of rule 2-107 of the Rules of Professional Conduct (fees for legal services) and compensation arrangements must not violate rule 3-102 of the Rules of Professional Conduct (financial arrangements with non-lawyers). And, publicity given to the second occupation and methods of seeking business must conform to rule 2-101 of the Rules of Professional Conduct (professional employment).

The balance of this opinion discusses these ethical constraints.

Duty of Confidentiality

Business and Professions Code section 6068 provides, in part:

"6068. It is the duty of an attorney . . .

(e) To maintain inviolate the confidences, and at every peril to himself preserve the secrets of his client..."

The practice of dual professions may raise very substantial problems in honoring the duty of confidentiality. For example, like an attorney, a broker may have a fiduciary relationship. Unlike an attorney, this duty may extend to parties which have potentially conflicting interests -- the buyer and seller. Further, specific pieces of information may call for disclosure to both parties under the law governing brokers. For instance, Business and Professions Code section 10232.5 ("Contents of Statement Given to Prospective Lender or Purchaser"), at subsection (b)(4), includes the following requirement: "Information available to the broker relative to the ability of the trustor or vendee to meet his or her contractual obligations under the note or contract including the trustor's or vendee's payment history under the note or contract." (Emphasis added.) It is easy to conjure up a situation where the buyer-client has divulged information to the lawyer indicating a precarious financial situation -- information that might be quite valuable to the seller of the property or to a prospective lender or purchaser of a mortgage note. See, for example, Anderson v. Thatcher (1946) 76 Cal.App.2d 50, 68 [172 P.2d 533]: ([A]n agent acting for adverse principals with the acquiescence of each has a bounden duty to act with fairness to each and must disclose to each all facts which he knows or should know would reasonably affect the judgment of each in permitting such dual agency").

An attorney-broker thus can be caught between conflicting professional obligations, viz., disclosure versus revealing client confidences. Honoring the duty of confidentiality may jeopardize the broker's license, harm the client and expose the lawyer to civil liability. This danger was recognized specifically by the Los Angeles County Bar Association Committee on Legal Ethics, opinion No. 384 (1980), wherein it was stated:

"The risk of such conflict in the situation at hand appears to be particularly great because the attorney, if initially engaged solely as broker, may become privy to information while acting solely as a broker which he would not have obtained if he had acted only as an attorney for one of the parties from the beginning."

Further, because of the broker's key role as facilitator of a transaction, an attorney who is subject to the duty of confidentiality may be placed in the anomalous position of being unable to extricate himself or herself from liability as aider and abettor to a fraud. For example, pending closing of escrow, the attorney may learn that some information concerning the financial condition of buyer contains a misstatement of material fact. In these circumstances the attorney may be required to withdraw pursuant to rule 2-111 of the Rules of Professional Conduct. Withdrawal would probably be inadequate to prevent consummation of the fraud which the attorney, as broker, may have aided and abetted, and section 6068, subdivision (e), of the Business and Professions Code on its face would require the attorney, at "every peril to himself," to maintain the client's secret.

Accordingly, the attorney may seek to avoid the likelihood of a conflict between the attorney's duty of avoiding conflict and the broker's duty of disclosure. An attorney-broker may advise a client of this potential conflict prior to undertaking representation and could consider that the client waive, in writing, the duty of confidentiality respecting information which the attorney as a licensed broker is obligated by law to disclose. (Maxwell v. Superior Court (1982) 30 Cal.3d 606.)

A closely related problem was addressed in Watt Industries, Inc. v. Superior Court (1981) 115 Cal.App.3d 802, which held that attorney's notes of conversations with his client, the purchaser of a condominium, were not protected under the work product privilege because the attorney was acting merely as a "business agent" for the client. Arguably, communications with the attorney acting as broker would not be subject to the attorney-client privilege, although this result would be inconsistent with the general conclusion that the profession of real estate broker is so law related that an attorney must practice it within the standards of the State Bar.

Duty of Loyalty

Rules 4-101 and 5-102 of the Rules of Professional Conduct contain prohibitions against an attorney accepting employment which is adverse to a client, or without disclosing his relationship with an adverse party, or which would represent conflicting interests, without first obtaining the informed and written consent of the client(s). Implicit in these rules is the concept that an attorney may not accept dual representation unless he or she can adequately and competently represent the interest of each. See, e.g., Business and Professions Code sections 6067 and 6068, and rule 6-101 of the Rules of Professional Conduct (failing to act competently). It is often difficult in a real estate transaction for a lay customer to identify accurately the interest represented by the broker. In the case put in the inquiry, the attorney is acting as broker for the buyer. Presumably most sellers of real estate will be separately represented or can be effectively advised in writing that the attorney-broker represents only the buyer and that seller should obtain separate representation.

An attorney-broker representing a seller is in a much more difficult position. Such a broker would list and advertise the property for sale and would hold himself or herself open to the general public as ready to facilitate the sale of the property. Potential buyers are as likely as not to be separately represented, and those who are not may expect seller's broker to be able to handle their end of the transaction as well.

An attorney-broker, of course, may not handle both ends of the transaction without complying with rules 4-101 and 5-102 of the Rules of Professional Conduct, at a minimum. And this raises the most difficult question of all -- should an attorney-broker represent both buyer's and seller's interest? While this question can only be answered in a context of a particular transaction, it is difficult to imagine a real estate transaction so simple that an attorney could represent both sides while avoiding the appearance of impropriety. However, under appropriate circumstances, California cases have permitted dual representation where there is full disclosure and informed consent. (See Klemm v. Superior Court (1977) 75 Cal.App.3d 893 [142 Cal.Rptr. 509] (dual representation in uncontested dissolution proceeding where no community property, wife waived child support and joint custody agreed) and cases cited therein.)

Another aspect of the duty of loyalty is addressed in rule 5-101 of the Rules of Professional Conduct, dealing with the circumstances under which an attorney may enter into a business transaction with a client. An agreement between an attorney-broker and a client buying real estate clearly is a business transaction subject to rule 5-101 of the Rules of Professional Conduct. Further, the attorney clearly has an adverse interest to the client in that the attorney will receive significantly greater compensation if the transaction closes than if it does not, which might lead the attorney to encourage consummation of the transaction on terms and conditions which the attorney might not endorse. Not only must this conflict be disclosed in writing to the client, the attorney must act scrupulously to insure that all actions taken are in fact in the best interest of the client. The attorney should also recognize that if matters go awry this very conflict may be offered as evidentiary support for a charge of malpractice.

Fee Arrangements

Rule 2-107 of the Rules of Professional Conduct provides that an attorney "shall not enter into an agreement for, charge or collect an illegal or unconscionable fee" and sets forth certain standards for determining the reasonableness of fees. (See also Bushman v. State Bar (1974) 113 Cal.Rptr. 904.)

The fee payable in the circumstance that the transaction is successfully consummated is likely to appear shockingly large when compared to the attorney's normal hourly rate charges. On the other hand, the overall fee arrangement is quite advantageous to the client since the client obtains the services of both an attorney and a broker at no additional cost (indeed, at no cost in most cases where the buyer's and seller's broker split fees payable by the seller). Accordingly, the fee arrangement proposed should not be viewed as objectionable under rule 2-107 of the Rules of Professional Conduct. However, the fee arrangement does involve a potential adverse interest to the client (see discussion above) and must be disclosed and consented to in compliance with rule 5-101 of the Rules of Professional Conduct.

Rule 3-102(A) of the Rules of Professional Conduct states that a member of the State Bar ". . . shall not directly or indirectly share legal fees except with a person licensed to practice law . . .". This rule has its origin in American Bar Association Disciplinary Rule 3-102, which is substantially to the same effect, and which is intended to help enforce Canon 3: "A lawyer should assist in preventing the unauthorized practice of law." This rule would not appear to be violated where the attorney-broker acts on behalf of the buyer of real property. No amount which has been paid to a member of the State Bar as "legal fees" will in fact have been shared with a non-member.

Rule 3-102(A) of the Rules of Professional Conduct is much more troublesome in the case where an attorney-broker is representing the seller. The amount paid to the attorney-broker on consummation of the sale, while designated as a real estate commission, is, in fact, paid in part for the performance of legal services. Because all of the activities of the attorney-broker are clearly law related, even though some of the activities could be performed by a licensed real estate broker, the full amount paid must be regarded as a "legal fee" within the meaning of rule 3-102(A) of the Rules of Professional Conduct. It should be noted that the buyer's broker is engaging in a lawful profession. However, care should be taken to avoid the literal stricture of rule 3-102(A) by arranging that the buyer's nonattorney broker is receiving his or her commission directly from the buyer (e.g., the purchase price and the commission paid by seller to its broker may be reduced to offset the amount the buyer pays its own broker).

Finally, an attorney-broker may be prohibited by rule 3-102(A) of the Rules of Professional Conduct from sharing fees received with a salesperson, partner, or any other person who is not a member of the State Bar.

Advertising

As noted above, attorneys have a judicially sanctioned right to advertise. Advertising of an attorney's dual professional qualifications would likewise be permissible. However, all advertising and solicitation by an attorney-broker must conform to rule 2-101 of the Rules of Professional Conduct and standards adopted by the Board of Governors pursuant thereto.

CONCLUSION

An attorney who is also licensed as a real estate broker may act in both capacities on behalf of a client in connection with the purchase of real property so long as both professions are pursued within the standards of the State Bar of California. If the attorney is to be compensated by either sharing in the real estate broker's commission, if the transaction is consummated, or at the attorney's usual hourly rate, if the transaction is not consummated, the attorney must comply with rule 5-101 of the Rules of Professional Conduct. Although such compliance may be best achieved by a written fee agreement in which the terms of the transaction are fully disclosed and as to which the client is given a reasonable opportunity to seek other counsel, such waiver may not be effective. An attorney acting in both capacities on behalf of a client in connection with the sale of a parcel of real property is likely to encounter great difficulty in conducting both professions within the standards of the State Bar, and is subject to a substantial possibility of violating the Rules of Professional Conduct.

This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.