Can a lawyer take a fixed fee for title work while a mortgage lender collects and keeps an attorney's fee charged in the lawyer's name at loan closings?

Plain-English summary

The opinion (rendered April 2, 1976, and amended April 6, 2013) addressed Lawyer A, who does title work and renders title opinions to Company B, a mortgage lender, and is paid a fixed fee for the title work plus an additional fee for preparing deeds. Company B's loan closing statements list an attorney's fee of one percent of the loan, which Company B collects; from it Lawyer A receives only his fixed fee and Company B keeps the balance. Lawyer A does not prepare the loan closing papers, all administrative and clerical work is done by Company B, but Lawyer A is required to endorse the loan closing check along with the mortgagors. The question was whether Lawyer A's participation aids the unauthorized practice of law.

The opinion first recognized that Company B may represent its own interests in its mortgage loan closings. Relying on Ethical Consideration 3-7, the Committee explained that the prohibition on non-lawyers practicing law does not prevent a layman from representing himself. Company B may therefore prepare its own closing papers (other than conveyances to which it is not a direct party) and perform related clerical work without creating ethical problems for Lawyer A, and it may pass those costs along or profit from them through properly labeled fees or service charges.

The Committee drew the line at the "attorney's fee." It concluded that Lawyer A cannot ethically participate in any practice through which Company B performs legal or quasi-legal services and is permitted to collect and retain part of an attorney's fee ostensibly his, because MRPC 5.5(a) prohibits assisting a non-member of the bar in the unauthorized practice of law and MRPC 5.4(a) prohibits sharing legal fees with a non-lawyer. The opinion added that requiring Lawyer A to endorse the closing check, coupled with the one-percent attorney's fee, may leave the parties with the false impression that an attorney closed the transaction, that Lawyer A is the closing attorney who has assumed the attendant responsibilities, and that he is being paid a customary fee, none of which is true.

In practice

Under this opinion, a lawyer who does title work for a mortgage lender may take a properly labeled fee for that work, but may not let the lender charge an "attorney's fee" in the lawyer's name and keep part of it while the lender performs the legal or quasi-legal closing work. The Committee applied MRPC 5.4(a) and 5.5(a) to bar that arrangement as both fee sharing with a non-lawyer and assisting the unauthorized practice of law. The opinion also treats as improper any practice that may reasonably lead the public to believe a transaction is receiving a lawyer's attention, supervision, and handling when it is not.

Common questions

Q: Can a lawyer do title work for a mortgage lender?

A: Yes. The opinion concluded the lender may handle its own closings and pass the costs along through properly labeled fees, and the lawyer may take a fixed fee for the title work and deed preparation.

Q: Can the lender charge an "attorney's fee" in the lawyer's name and keep part of it?

A: No. The opinion held that a lawyer may not participate in a practice where the lender performs legal or quasi-legal services and collects and retains part of an attorney's fee ostensibly the lawyer's, citing MRPC 5.4(a) and 5.5(a).

Q: Why does the opinion object to the lawyer endorsing the closing check?

A: Per the opinion, requiring the lawyer's endorsement together with a one-percent "attorney's fee" may leave the parties with the impression that a lawyer closed the transaction and assumed its responsibilities when he did not.

Background and rules framework

The opinion interprets MRPC 5.4(a) (a lawyer or firm shall not share legal fees with a non-lawyer) and MRPC 5.5(a) (a lawyer shall not assist a non-member of the bar in conduct that is the unauthorized practice of law). These correspond to Model Rules 5.4 and 5.5. The opinion also relies on Ethical Consideration 3-7 (a layman may represent himself).

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 5.4(a) (no fee sharing with non-lawyers) (cf. Model Rule 5.4)
• MRPC 5.5(a) (no assisting unauthorized practice of law) (cf. Model Rule 5.5)

Other authorities cited:

• Ethical Consideration 3-7 (former ABA Code of Professional Responsibility): a layman may represent himself

See also

• MS Bar Ethics Op. 32: Loan Company Collection Suits
• MS Bar Ethics Op. 25: Form Collection Letters
• ABA Formal Op. 464: Fee Division Across Jurisdictions

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/33/
• Original PDF: https://www.msbar.org/media/1075/et_op_33-amended.pdf

Original opinion text

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

ETHICS OPINION NO. 33

OF THE MISSISSIPPI BAR

RENDERED April 02, 1976

AMENDED April 06, 2013

AIDING THE UNAUTHORIZED PRACTICE OF LAW - It is improper for a lawyer to participate in a loan closing transaction in which the mortgage lender renders legal or quasi-legal services and receives a division of "attorney's fees", ostensibly the lawyer's.

The Ethics Committee of the Mississippi Bar has been requested to render an opinion on the following facts:

Lawyer A does a title work for, and renders title opinions to, Company B. a mortgage lender, in connection with its mortgage loans. Lawyer A is paid a fixed fee for the title work and an additional fee for his preparation of deeds. Company B on its loan closing statements sets forth an attorney's fee in the amount of I percent of its loans. This amount is collected by Company B. but from it Lawyer A is paid only a fixed fee. The balance is retained by Company B. Lawyer A does not prepare any of the loan closing papers or any of the other instruments utilized in the closing of loans, and all administrative and clerical work is performed by Company B. Lawyer A is, however, required to endorse the loan closing check along with the mortgagors.

The question posed is whether the participation by Lawyer A in such practices constitutes "aiding the unauthorized practice of law."

It is clear that Company B. if it likes, can represent its own interests in all features of its mortgage loan closings, legally and ethically, Ethical Consideration 3-7 provides:

The prohibition against a non-lawyer practicing law does not prevent a layman from representing himself, for then he is ordinarily exposing only himself to possible injury. The purpose of the legal profession is to make educated legal representation available to the public but anyone who does not wish to avail himself of such representation is not required to do so.

Accordingly, Company B can prepare all papers and other instruments utilized in the closing of its loan (save, of course, conveyances and other legal instruments to which it is not a direct party), and can perform all related administrative and clerical work, all without ethical complications for Lawyer A. It is of no concern that Company B may pass the cost of such services along to others, or even profit from them, through fees or service charges, properly labeled.

It is the opinion of the Committee, however, that Lawyer A cannot ethically participate in any practice through which Company B performs legal or quasilegal services and for those services is permitted to collect and retain any part of an "attorney's fee" ostensibly his. Mississippi Rule of Professional Conduct 5.5(a) (MRPC) prohibits an attorney from assisting a person who is not a member of the bar in the performance of activities that constitute the unauthorized practice of law. Furthermore, Rule 5.4(a), MRPC, prohibits a lawyer or law firm from sharing legal fees with a non-lawyer.

Whatever its purpose, the requirement that Lawyer A endorse the loan closing check, coupled with the imposition of a one percent "attorney's fee", may have the effect in many cases of leaving all parties to the transaction (other than Lawyer A and Company B) with the impression that the transaction is one which is being closed by an attorney, which it is not, that Lawyer A is the closing attorney, which he is not, that he has assumed the attendant responsibilities, which he had not, or at least has not expected to, and that he is being paid a customary fee for the service, which he is not.

Correspondingly, it is improper in the opinion of the Committee for a lawyer to participate in practices, such as those described, which may reasonably lead members of the public to believe the transactions in which they are involved are receiving the attention, supervision, and handling of a lawyer, when in fact they are not.