How much can a Colorado lawyer charge for a foreclosure, and can the fee be higher because a non-client debtor or purchaser pays it?

Plain-English summary

Opinion 54 (undated; addendum issued 1995) addressed attorney fees charged in foreclosure proceedings, those involving deeds of trust, mortgages, installment contracts, or other security devices that permit assessing attorney fees as part of the recovery. It did not address or limit fees determined by a court. In these proceedings, attorney fees and costs are often charged to a debtor who cures or redeems, to a redeeming junior lienor, or to the purchaser at the foreclosure sale without a judicial determination, and the underlying instrument may prescribe a method (a reasonable fee, a specified fee, or a percentage).

The Committee concluded, under DR 2-106(B) of the Code of Professional Responsibility, that it is unethical to agree to, charge, or collect an illegal or clearly excessive fee for managing a foreclosure, applying the rule's reasonableness factors (time and labor, the fee customarily charged locally, the amount involved and results, and so on). A fee amount specified in the note or security instrument is only a factor and does not set the ethical standard; a contractual fee provision cannot justify an excessive fee, and where a statute caps the fee, any amount above the cap is illegal and therefore unethical. The Committee relied on Colorado Supreme Court authority that excessive fees are grounds for discipline (People v. Radinsky) and that fees are recoverable only on a showing that they were paid or incurred and were reasonable (Waterman v. Silverman).

The Committee further concluded that because the purpose of the payor's payment is to reimburse the creditor for default-related expense, and because a redeeming debtor, junior lienor, or sale purchaser does not become the foreclosing lawyer's client, the lawyer may not reap a windfall from the non-client status of the payor: it is unethical to agree with the client that the fee will be higher if paid by such a payor, and unethical to assess (with or without agreement) a greater fee than would be charged to the creditor-client. Finally, the Committee concluded it is improper for a lawyer to share any portion of the foreclosure fee with the client; all reimbursed fees must be paid to the lawyer, consistent with DR 3-102(A)'s bar on sharing legal fees with a nonlawyer.

Currency note

This opinion was issued under the former Colorado Code of Professional Responsibility (the opinion itself is undated), before the Colorado Rules of Professional Conduct took effect on January 1, 1993, and before Colorado's 2008 revisions to those rules. A 1995 addendum mapped the opinion to Rule 1.5 (reasonable fees) and Rule 5.4 (sharing legal fees with a nonlawyer). Subsequent rule amendments, fee statutes, or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules and statutes before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could a contractual or note-specified attorney fee justify whatever the lawyer charged in a foreclosure?

A: No. The opinion concluded that a fee amount specified in the note or security instrument is only one factor and does not justify an excessive fee or set the ethical standard; the fee still had to be reasonable under DR 2-106(B), and any amount above a statutory cap was illegal.

Q: Could the lawyer charge the debtor who redeemed more than the creditor-client would have paid?

A: No. The opinion concluded that the redeeming debtor, junior lienor, or sale purchaser does not become the lawyer's client, and it is unethical to charge that payor a greater fee than would properly be charged to the lawyer's own client, or to agree with the client to inflate the fee because someone else pays it.

Q: Could the lawyer split the foreclosure fee with the creditor-client?

A: No. The opinion concluded it is improper to share any portion of the foreclosure fee with the client; the lawyer must insist that all fees received to reimburse the client be paid to the lawyer, consistent with the bar on sharing fees with a nonlawyer.

Background and rules framework

The opinion interpreted the then-governing Colorado Code of Professional Responsibility, principally DR 2-106(B) (no clearly excessive fee, with reasonableness factors) and DR 3-102(A) (no sharing of legal fees with a nonlawyer). The 1995 addendum and the modern Model Rules analogs are Rule 1.5 (fees must be reasonable) and Rule 5.4 (no sharing of legal fees with a nonlawyer).

Citations and references

Rules of Professional Conduct:

• Colo. Code of Professional Responsibility DR 2-106(B), DR 3-102(A) (governing rules at issuance)
• Colo. RPC 1.5 / Model Rule 1.5 (fees must be reasonable; current analog)
• Colo. RPC 5.4 / Model Rule 5.4 (no sharing of legal fees with a nonlawyer)

Cases:

• People v. Radinsky, 176 Colo. 357, 490 P.2d 951 (1971), excessive fees as grounds for discipline
• Waterman v. Silverman, 156 Colo. 199, 397 P.2d 739 (1964), attorney fees recoverable only if paid or incurred and reasonable

See also

• CBA Formal Op. 100: Conversion Clauses in Contingent Fee Agreements
• CBA Formal Op. 66: Charging Interest on Unpaid Fees
• ABA Formal Op. 02-427: Security Interest to Secure a Fee

Source

• Landing page: https://www.cobar.org/ethicsopinions
• Original PDF: https://www.cobar.org/Portals/COBAR/repository/ethicsOpinions/FormalEthicsOpinion_54_2011.pdf