In a residential closing where the buyer and seller have separate lawyers, can the buyer's lawyer charge the seller for work, like reviewing the other side's documents or clearing title?

Plain-English summary

A buyer's lawyer (Lawyer A) handled a residential closing where the seller used separate counsel (Lawyer B). Lawyer A reviewed and revised Lawyer B's closing documents for the buyer's benefit and then charged the seller a $100 fee, which the seller and Lawyer B disputed. The opinion works through five inquiries about when a lawyer may charge the opposing, separately represented party.

The core holding is that work Lawyer A does for her own client (the buyer) may be charged to the seller only through Rule 1.8(f): the buyer must give informed consent to the seller paying the fee, the payment must not interfere with the lawyer's independent judgment or the client-lawyer relationship, and confidential information must stay protected under Rule 1.6; any such fee must also not be illegal or clearly excessive under Rule 1.5(a). Critically, Rule 1.8(f) presumes the third party offers or agrees to pay; nothing in the Rules lets a lawyer unilaterally charge an opposing or third party who has not consented, even if that party benefits from the work. So if the seller refuses, Lawyer A cannot bill the seller for reviewing Lawyer B's documents (Inquiry #1) or for reviewing a contested estate in the seller's chain of title to ensure the buyer gets clean title (Inquiry #3); that work should be billed to the buyer instead. Lawyer A may, of course, charge the buyer an additional, non-excessive fee for the extra work (Inquiry #2).

The opinion draws a line for work that primarily discharges the seller's own obligations. Cancelling the seller's paid-off lien primarily benefits the seller by relieving the seller of the duty to deliver clean title, so Lawyer A may charge the seller for it, provided the seller gets advance notice and a reasonable chance to object, does not object, the buyer consents to the seller's payment, and the fee is not illegal or clearly excessive (Inquiry #4). That arrangement does not create an attorney-client relationship between Lawyer A and the seller; each lawyer still represents only their own client, with the parties agreeing to Lawyer A doing the seller's task for efficiency. If the seller objects, Lawyer A may charge only the buyer (and should look to available legal remedies to make the seller meet its obligations). Finally, Lawyer A may charge the seller for documented expenses tied to the seller's role (postage, copying, overnight delivery, wire fees) after notice and an opportunity to object (Inquiry #5).

In practice

Under this opinion, a buyer's lawyer in a closing where the seller has separate counsel may charge the seller for work done for the buyer only with the seller's agreement, the buyer's informed consent under Rule 1.8(f), protection of confidential information under Rule 1.6, and a fee that is not illegal or clearly excessive under Rule 1.5(a); the lawyer may not unilaterally bill the non-consenting seller even though the seller benefits. The opinion holds that work primarily fulfilling the seller's own obligations, such as cancelling the seller's lien, may be charged to the seller after advance notice and a chance to object, with the buyer's consent and a fair fee, and without creating an attorney-client relationship with the seller. The lawyer may always charge the buyer a non-excessive fee for the additional work, and may charge the seller for documented expenses tied to the seller's role after notice and an opportunity to object.

Common questions

Q: Can a North Carolina buyer's lawyer bill the seller's side for reviewing the seller's closing documents?

A: Generally no. Opinion #1 concludes the work is done for the buyer, so the seller can be charged only with the seller's agreement, the buyer's informed consent under Rule 1.8(f), and a fee that is not illegal or clearly excessive; the lawyer cannot unilaterally bill a non-consenting seller.

Q: Can the lawyer instead bill her own client for the extra work?

A: Yes. Opinion #2 concludes the buyer's lawyer may charge the buyer an additional fee for reviewing and responding to the other side's documents, provided the fee is not illegal or excessive under Rule 1.5(a).

Q: Can the buyer's lawyer charge the seller for title work needed to get the buyer clean title?

A: No, not unilaterally. Opinion #3 concludes that reviewing a contested estate in the seller's chain of title is work for the buyer, so the seller can be charged only with the seller's agreement, the buyer's consent under Rule 1.8(f), and a fair fee; otherwise it should be billed to the buyer.

Q: Can the lawyer charge the seller for cancelling the seller's old lien?

A: Yes, with conditions. Opinion #4 concludes that cancelling the seller's paid-off lien primarily benefits the seller, so the buyer's lawyer may charge the seller if the seller gets advance notice and a chance to object, does not object, the buyer consents, and the fee is not illegal or clearly excessive; this does not create an attorney-client relationship with the seller.

Q: Can the lawyer pass closing expenses tied to the seller's role on to the seller?

A: Yes. Opinion #5 concludes the lawyer may charge the seller for documented, accurate expenses tied to the seller's role (postage, copying, overnight delivery, wire fees) after giving the seller advance notice and a reasonable opportunity to object.

Background and rules framework

The opinion interprets North Carolina Rule 1.8(f) (a lawyer may accept compensation for representing a client from a third party only with the client's informed consent, no interference with independent judgment or the client-lawyer relationship, and protection of information under Rule 1.6), Rule 1.5(a) (no illegal or clearly excessive fee), Rule 1.6 (confidentiality), and Rule 1.7 (concurrent conflicts, noting that joint representation of buyer and seller can be permissible but here the seller chose separate counsel). These correspond to ABA Model Rules 1.8, 1.5, 1.6, and 1.7. The opinion relies on prior NC opinions CPR 100, RPC 210, 2006 FEO 3, and 2013 FEO 4. Whether statute, court order, or the purchase agreement independently allows charging the seller is, the opinion notes, a legal question outside the Rules.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.8 / NC Rule 1.8(f) (compensation from a third party)
• Model Rule 1.5 / NC Rule 1.5(a) (illegal or clearly excessive fees)
• Model Rule 1.6 / NC Rule 1.6 (confidentiality)
• Model Rule 1.7 / NC Rule 1.7 (concurrent conflicts)

Other opinions cited:

• CPR 100; RPC 210 (multiple representation in real estate transactions)
• 2006 FEO 3; 2013 FEO 4 (buyer-seller representation; fees)

See also

• SC Bar Op. 09-01: Closing Lawyer's Scope and Responsibility
• ABA Formal Op. 01-421: Lawyer Acting Under Insurance Company Guidelines

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2021-formal-ethics-opinion-3/

Original opinion text

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

Buyer retained Lawyer A to represent Buyer in a residential real estate transaction. Seller declined to retain Lawyer A and instead retained separate counsel for the transaction, Lawyer B. Leading up to the closing, rather than using her standard documents for the transaction, Lawyer A received documents prepared by Lawyer B to be used at closing, which differed substantially from the documents Lawyer A planned to use at closing. As a result, Lawyer A was required to review Lawyer B’s work and make changes to the proposed documents for the benefit of her client, Buyer. At closing, Lawyer A charged a $100 fee to Seller for the work Lawyer A completed in reviewing and responding to Lawyer B’s proposed documents. Lawyer B and Seller objected to the fee charged by Lawyer A to Seller.

Inquiry #1:

May Lawyer A charge a fee to Seller for the work completed in reviewing and responding to Lawyer B’s proposed documents?

Opinion #1:

No, unless a) Seller agrees to pay the fee, b) Buyer consents to Seller’s payment of Lawyer A’s fee, and c) the fee charged is not illegal or clearly excessive.

Rule 1.8(f) prohibits a lawyer from receiving compensation for representing a client from a person other than the client unless these three requirements are met: “(1) the client gives informed consent; (2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and (3) information relating to the representation of a client is protected as required by Rule 1.6.” Additionally, Rule 1.5(a) states that “[a] lawyer shall not make an agreement for, charge, or collect an illegal or clearly excessive fee[.]”

Lawyer A has been retained by Buyer to represent Buyer (and presumably Buyer’s lender, if applicable) in the acquisition of real property from Seller. Although representation of multiple parties to a real property transaction is possible without violating Rule 1.7’s prohibition on engaging in a concurrent conflict of interest during a representation (see, e.g., CPR 100, RPC 210, 2006 FEO 3, and 2013 FEO 4), Seller has elected to obtain separate counsel for the transaction. Accordingly, Lawyer A’s representation is limited to Buyer, and all work completed in the transaction by Lawyer A is for the benefit of her client, Buyer. Under these circumstances, the only way Lawyer A could collect a fee for the legal services provided to Buyer from anyone other than Buyer would be through compliance with Rule 1.8(f). Specifically, Lawyer A must a) obtain Buyer’s informed consent to Seller paying all or a portion of Lawyer A’s fee for completing her representation of Buyer in the transaction, b) ensure that Seller’s payment of Lawyer A’s fee does not interfere with lawyer’s independence of professional judgment or with the client-lawyer relationship; and c) ensure that all information deemed confidential pursuant to Rule 1.6 remains appropriately protected in accordance with that Rule. Furthermore, any fee collected by Lawyer A from Seller or a third party for the benefit of Buyer must not be illegal or excessive pursuant to Rule 1.5(a). See 2006 FEO 3 and 2013 FEO 4.

Of course, the scenario contemplated by Rule 1.8(f) whereby a third party (or opposing party) pays the lawyer for legal services provided to the lawyer’s client presumes the third/opposing party is offering or agrees to pay the lawyer’s fee. Nothing in the Rules of Professional Conduct permits or empowers a lawyer to charge a third or opposing party for legal services performed for the benefit of her client without that party’s consent. This is true even if the work completed by the lawyer for the benefit of her client also benefits the opposing or a third party. Under the present inquiry, should Seller refuse to pay Lawyer A’s proposed fee, Lawyer A may not unilaterally charge a fee to Seller without Seller’s consent. Whether statutory law, court order, or some other legal obligation between the parties (such as a purchase agreement) permits Lawyer A to charge a fee to Seller in this or a similar scenario is a legal question outside the purview of the Ethics Committee. See 2006 FEO 3 and 2013 FEO 4.

Inquiry #2:

May Lawyer A charge an additional fee to Buyer for the work completed in reviewing and responding to Lawyer B’s proposed documents?

Opinion #2:

Yes, provided the fee charged is not illegal or excessive. See Rule 1.5(a).

Inquiry #3:

During Lawyer A’s review of the property’s title, Lawyer A discovered that Seller acquired the property from an estate. Lawyer A’s initial review revealed that the estate from which Seller acquired the property went through a highly contested probate proceeding, with the estate’s real property (including the property involved in the present transaction) divided amongst the heirs. As a result, Lawyer A spent additional time reviewing that estate to ensure her client (Buyer) will obtain clean title to the property from Seller.

May Lawyer A charge a fee to Seller for the time spent reviewing the estate to ensure Seller’s title was clean for Buyer’s transaction?

Opinion #3:

No, unless a) Seller agrees to pay the fee, b) Buyer consents to Seller’s payment of Lawyer A’s fee, and c) the fee charged is not illegal or clearly excessive. In this scenario, Lawyer A is completing work for the benefit of her client, Buyer, to ensure Buyer’s goals for the representation are realized (namely, obtaining clean title to the property sought). Any additional work completed that warrants an additional charge by Lawyer A should be addressed with Lawyer A’s client for whom the work is completed. See Rule 1.8(f) and Opinion #1.

Inquiry #4:

When Seller originally acquired the subject property, Seller obtained a mortgage loan from a lender to fund his purchase of the property. As a result, Seller’s lender obtained a lien on the property to secure the loan to Seller. As part of closing, a portion of the proceeds from the sale of Seller’s property was paid to Seller’s lender in satisfaction of the mortgage loan Seller previously obtained to purchase the subject property. With Seller’s loan now satisfied, and to ensure Buyer obtains clean title from Seller, Lawyer A needs to file a cancellation of lien to remove the lien held by Seller’s lender.

May Lawyer A charge a fee to Seller for the work completed in cancelling Seller’s lender’s lien?

Opinion #4:

Yes, provided that a) Seller is provided advance notice of the fee to be charged and a reasonable opportunity to object, b) Seller does not object to the fee charged, c) Buyer consents to Seller’s payment of Lawyer A’s fee, and d) the fee charged is not illegal or clearly excessive. Although Buyer receives a benefit from Lawyer A’s work in cancelling Seller’s lien, (namely, obtaining clean title to the property sought), Lawyer A’s services primarily benefit Seller in that Lawyer A is relieving Seller of his statutory and/or contractual obligations to provide clean title to Buyer. As such, Lawyer A may charge Seller for services that fulfill Seller’s sole obligations, but Lawyer A must provide Seller with notice of the intended charge and an opportunity to object to the service and charge. If Seller does not object to the charge, Lawyer A may complete the work and charge Seller as proposed.

Notably, Lawyer A’s service and charge to Seller does not create an attorney-client relationship with Seller. Rather, Lawyer A continues to represent Buyer, and Lawyer B continues to represent Seller, but for purposes of efficiency the parties agree to Lawyer A completing the tasks required of Seller and Lawyer B.

Should Seller object to Lawyer A’s offer and proposed fee, Lawyer A may not charge Seller for work completed in ensuring clean title; instead, Lawyer A may only charge her client, Buyer, for additional work in completing the transaction so long as any such charge complies with Rule 1.5. While outside of the scope of the Rules of Professional Conduct, Lawyer A should review and rely upon, if necessary, any available legal remedies to ensure Seller complies with all applicable statutory and/or contractual obligations associated with the transaction, including providing clean title.

Inquiry #5:

May Lawyer A charge Seller for expenses incurred during the closing that are associated with Seller’s role in the transaction?

Opinion #5:

Yes, provided that a) Seller is provided advance notice of the charged expense and a reasonable opportunity to object, b) Seller does not object to the charged expense, and c) the charged expense is an accurate and documented expense incurred by Lawyer A in facilitating Seller’s role in the transaction. Such expenses include, but are not limited to, postage, copying expenses, overnight delivery charges, and/or wire transfer fees associated with carrying out the transaction.