Can a seller's attorney accept a fee paid by the buyer, under the sale agreement, for legal services the attorney rendered only to the seller?

Plain-English summary

The inquiry asked whether a seller's attorney may accept a fee from a purchaser, paid pursuant to an agreement between purchaser and seller, where the purchaser has agreed to pay a specific legal fee to the attorney for services rendered to the seller. The question was framed by two conditions: the fee would be entirely separate from any fee the purchaser might pay the attorney for the purchaser's own services, and the determination and payment of the fee would meet the ethical standards of In re Kamp.

The Committee took those conditions as given and treated the question narrowly: whether the seller's attorney may accept a buyer-paid fee for services actually rendered to the seller only. It noted the long-recognized, ethical practice of lenders requiring borrowers to pay the lender's attorney's reasonable fee, so long as it is clear the attorney represents the institution alone. It recalled Opinion 13's point that such arrangements should be made clear and unambiguous to the buyer, and Opinion 7's rule that attorneys may not permit others to fix their fees.

Because the inquiry made clear the fee was for services actually rendered, and assuming the seller's attorney would fix the fee consistent with Canon 12, the Committee concluded it was professionally proper for the seller's attorney to accept such a fee from the buyer for services rendered on behalf of the seller. It added that the fee must be only reasonable compensation as agreed with the attorney, and not a fee determined solely between the parties.

Currency note

This opinion was issued in February 1964, 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 of the former Canons of Professional Ethics; payment of a lawyer's fee by someone other than the client is now governed by RPC 1.8(f), and the reasonableness of fees by RPC 1.5. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could the seller's attorney accept a fee paid by the buyer?

A: Yes, on the stated conditions. The Committee held it professionally proper for the seller's attorney to accept a buyer-paid fee for services actually rendered to the seller.

Q: What was the key condition the Committee attached?

A: The seller's attorney had to fix the fee himself under Canon 12. The fee had to be reasonable compensation agreed with the attorney, not a fee determined solely between the buyer and seller.

Q: Why did the In re Kamp standard matter?

A: The inquiry assumed the arrangement would meet In re Kamp's ethical requirements for representation in real-estate transactions, so the Committee did not revisit those and addressed only the buyer-paid-fee question.

Background and rules framework

The opinion applied Canon 12 of the former Canons of Professional Ethics, requiring the attorney to fix his own fee, in the context of In re Kamp and the Committee's Opinions 7 and 13. The modern analogs are RPC 1.8(f), governing payment of a lawyer's fee by a third person, and RPC 1.5, on reasonable fees.

Citations and references

Rules of Professional Conduct (as in effect at the time):

• Canon of Professional Ethics 12 (fixing the amount of the fee)

Cases:

• In re Kamp, 40 N.J. 588 (1963), ethical standards for an attorney in a real-estate transaction

Other opinions cited:

• N.J. ACPE Opinions 7, 86 N.J.L.J. 405 (1963), and 13, 87 N.J.L.J. 1 (1964): a lawyer may not let others fix his fee; disclosure in development-tract sales
• Association of the Bar of the City of New York, Committee on Professional Ethics, Opinion 695 (1946): borrower paying the lender's attorney's fee

See also

• NJ ACPE Op. 40: A Developer's Attorney at the Closing
• NJ ACPE Op. 119: Borrower's Payment of Fees Charged by the Lender
• NJ ACPE Op. 51: Developer's Attorney Dual-Representation Conflict

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp27-1.html

Original opinion text

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

87 N.J.L.J. 97
February 13, 1964

OPINION 27

Conflict of Interest
Fee Paid by Client's Customer

May an attorney for a seller of real property accept a fee from a purchaser thereof pursuant to an agreement entered into between the purchaser and seller, wherein the purchaser has agreed with the seller to pay a specific legal fee to the attorney on behalf of the seller for services rendered to the seller?

The member of the bar who submits this question makes it clear that (1) it is circumscribed by the fact that the fee to be paid would be entirely separate and apart from any fee which the purchaser might pay to the attorney for services rendered to such purchaser and (2) the determination and payment of the fee for services rendered by the attorney to the seller would be resolved in a manner consistent with the ethical standards required by In re Kamp, 40 N.J. 588 (1963).

Since the hypothesis is that the ethical standards required by In re Kamp, supra, will be met, the question here is simply whether an attorney for the seller may accept a fee from a purchaser pursuant to an agreement of sale entered into between the purchaser and seller by virtue of which the seller's attorney is to be paid a specific legal fee by the purchaser for his services actually rendered to the seller only. The amount of the fee must, of course, be fixed by the attorney for the seller, consistent with the requirements of Canons of Professional Ethics, Canon 12.

It has long been recognized that banks and other lending institutions granting mortgage loans, require borrowers to pay the expenses involved in the making of the loan, which expenses include a reasonable fee of the lender's attorney for his services performed for said lender; that this is an ethical practice so long as it is made clear to the borrower that the attorney represents the institution alone, and not the borrower. Assn. of the Bar, City of N.Y., Committee on Professional Ethics, Opinion 695 (1946).

In Opinion 13, 87 N.J.L.J. 1 (1964), of this Committee, it was said:

Most, if not all, of the questions raised herein would be obviated if the language of agreements for the sale of homes in development tracts were clear, and unambiguously and forthrightly advised the purchaser as to the precise nature of the representation of the attorneys named in the agreement - that they represented the seller only, or the lender, or both, as the case may be - but that they will not represent the buyer and that the buyer is expressly advised to have his own attorney to protect his interests.

It was further said:

Assuming the $350 fee was not fixed by the attorneys, there is an impropriety on the part of the attorneys in permitting others to fix their fee for the reasons set forth in our Opinion 7, 86 N.J.L.J. 405 (1963).

We note that the question propounded to us makes it clear that the fee to be paid to the attorney for the seller is to be for services actually rendered. While the inquiry is not explicit as to the fixing of the fee, we assume that it will be fixed by the attorney for the seller in a manner consistent with the provisions of Canon 12.

It is, therefore, our opinion that under these circumstances it is professionally proper for the attorney for the seller to accept a fee so determined from the buyer for his services rendered on behalf of the seller; but such fee shall only be for such reasonable compensation as may be agreed upon and with the attorney, and not such fee as has been determined solely between the parties.