May the lender's attorney accept payment from the borrower for the legal services the attorney renders to the lender?

Plain-English summary

The Committee was asked whether it is ethical for the lender's attorney to accept from the borrower payment for the attorney's services to the lender, even though the borrower is advised to retain his own attorney to look after his interests.

The Committee relied on its Opinion 27, 87 N.J.L.J. 97 (1964), which held that where the attorney fixes the fee according to the standards of Canon 12 and consistent with In re Ramp, 40 N.J. 588 (1963), it is proper for the parties to arrange that the seller's attorney's fee for services to the seller be paid by the buyer as part of the purchase contract. That opinion likewise recognized as ethical the practice of requiring a borrower to pay for the services of the lender's attorney rendered for the lender, provided it is clear that the borrower understands the lender's attorney represents the lender and not the borrower.

Assuming the requirements of In re Ramp would be met, the Committee concluded the action is ethical, and that the lender's requiring the payment of its attorney's fees does not affect the result (citing Opinions 93 and 110).

Currency note

This opinion was issued in November 1967, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canon 12 and In re Ramp on fees. The questions of reasonable fees and of a third party paying a lawyer's fee are now treated under RPC 1.5 and RPC 1.8(f). Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific requirement mentioned here.

Common questions

Q: Can the borrower be required to pay the lender's attorney's fee?

A: Yes. The Committee held it ethical for the borrower to pay for the lender's attorney's services to the lender, provided the borrower understands the attorney represents only the lender and the fee is properly fixed.

Q: Does it matter that the lender, not the borrower, requires the payment?

A: No. The Committee said the lender's requiring payment of its attorney's fees does not change the result.

Background and rules framework

The opinion extends Opinion 27's rule that one party may pay another party's lawyer's fee, where the fee is properly fixed (Canon 12; In re Ramp) and the paying party understands the lawyer does not represent him. In current New Jersey terms, the fee must be reasonable under RPC 1.5, and a third party's payment of a lawyer's fee is governed by RPC 1.8(f), which requires the client's informed consent and protection of the lawyer's independence and the client's confidences.

Citations and references

Cases:

• In re Ramp, 40 N.J. 588 (1963): standards for fixing attorney fees

Other authorities:

• Canons of Professional Ethics, Canon 12

Other opinions cited:

• NJ ACPE Opinion 27, 87 N.J.L.J. 97 (1964): a buyer may pay the seller's attorney's fee where the fee is properly fixed
• NJ ACPE Opinion 93, 89 N.J.L.J. 248 (1966); Opinion 110, 90 N.J.L.J. 297 (1967)

See also

• NJ ACPE Op. 120: Collecting Title-Company Charges at a Closing
• NJ ACPE Op. 121: Reimbursing a Matrimonial Client From the Counsel-Fee Award

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp119-1.html

Original opinion text

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

90 N.J.L.J. 749
November 16, 1967

OPINION 119

Borrower's Payment of Fees Charged Lender

This inquiry asks whether it is ethical for the lender's attorney to accept from the borrower payment for the attorney's services to the lender, even though the borrower is advised to retain his own attorney to look after his interests.

In this Committee's Opinion 27, 87 N.J.L.J. 97 (1964), we held that, where the attorney fixes the fee according to the standards of Canons of Professional Ethics, Canon 12, and in a manner consistent with the requirements of In re Ramp, 40 N.J. 588 (1963), it is proper for the parties to arrange that the fees of the seller's attorney for services rendered to the seller be paid by the buyer as part of the purchase contract. In that opinion we recognized the practice of requiring a borrower to pay for the services of the lender's attorney rendered for the lender as ethical, provided it is clear that the borrower understands that the lender's attorney is representing the lender and not the borrower.

We assume that in this inquiry the requirements of In re Ramp, supra, will be met. Hence, we conclude that the action is ethical. The fact that the lender requires the payment of its attorney's fees does not affect the result. See this Committee's Opinions 93, 89 N.J.L.J. 248 (1966), and 110, 90 N.J.L.J. 297 (1967).