Ezel / Ethics Opinions / NYSBA
NYSBA 2022-03-03

Can a lawyer who owns a real estate company act as the lawyer on closings referred by a broker at that company, where the broker and the company split the commission?

Short answer: No. The opinion concludes that because the lawyer has a financial interest in the brokerage commissions his company splits with its brokers, serving as the closing lawyer creates a per se non-waivable conflict under Rule 1.7, and waiving the company's share of the commission in exchange for referrals would separately violate the payment-for-referrals rule, Rule 7.2(a).
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page) is the authoritative source for any reliance.

NYSBA Ethics Opinion 1237: Closings Referred by a Broker in the Lawyer's Own Real Estate Company

Short answer: The opinion concludes that a lawyer who owns a real estate company may not serve as the closing lawyer on transactions referred by a broker associated with that company where the broker and the company split the commission, because the lawyer's financial interest in the commission creates a per se non-waivable conflict; waiving the company's share in exchange for the referrals would separately violate Rule 7.2(a).

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's view of New York's Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

Plain-English summary

The inquirer is both an attorney and a real estate broker who owns a real estate company separate from his law practice. A more active real estate agent is considering joining the company; under the arrangement, the agent and the company would split commissions on brokered transactions according to a pre-agreed percentage. The agent already refers some clients to the inquirer for legal work and wants to keep doing so after joining the company. The inquirer asks whether he may serve as the closing lawyer on those referrals, and, if not, whether waiving his company's share of the commission would cure the problem.

On the first question, the opinion applies Rule 1.7(a)(2), which defines a personal-interest conflict where a reasonable lawyer would conclude there is a significant risk that the lawyer's professional judgment will be adversely affected by his own financial or business interests. The committee's prior opinions hold consistently that a lawyer may not act as both lawyer and broker in the same real estate transaction, with or without client consent, and that the conflict is per se non-waivable, citing N.Y. State 1043 (2015), 1177 (2017), 916 (2012), and 933 ¶ 7 (2012). Because the inquirer, as owner, has a financial interest in the commissions his associated brokers generate and split with the company, the committee finds the same per se non-waivable conflict: the financial stake would interfere with the lawyer's independent judgment.

On the second question, the inquirer points to N.Y. State 1208 (2020), where an attorney could accept referrals from her paralegal-broker because she had no financial interest in that broker's commission. The committee distinguishes Opinion 1208: there, the clients owed the same commission regardless of which attorney handled the closing, whereas here clients who hire the inquirer would receive a discount on the commission. That proposed waiver implicates Rule 7.2(a) on payment for referrals. By letting the broker offer clients a lower commission without reducing the broker's own earnings, the inquirer would be giving the broker "something of value" in exchange for referrals, which Rule 7.2(a) prohibits. The committee contrasts N.Y. State 845 part C (2010), where a lawyer who shares a referral fee and remits it to the client is permitted to offer reduced fees; the acceptable case is the lawyer enabling a client discount, not the lawyer enhancing the broker's business prospects in exchange for referrals.

In practice

Under this opinion, a lawyer who owns or has a financial interest in a real estate brokerage cannot serve as the lawyer on closings that generate a commission for that brokerage; the conflict is per se non-waivable under Rule 1.7, so client consent does not cure it. Per the opinion, restructuring the deal so the lawyer's company waives its share of the commission in exchange for the broker's referrals does not solve the problem and independently violates the payment-for-referrals rule, Rule 7.2(a). The opinion distinguishes the permitted case (N.Y. State 1208, where the lawyer has no interest in the broker's commission) from the prohibited one here.

Common questions

Q: Can a lawyer be both the lawyer and the broker (or have a financial stake in the brokerage) in the same real estate deal?

A: Per the opinion, no; the committee's opinions consistently treat that as a per se non-waivable conflict under Rule 1.7, because the financial interest in the commission interferes with independent legal judgment, and client consent does not cure it.

Q: Does waiving the lawyer's share of the brokerage commission fix the conflict?

A: No. Per the opinion, the conflict remains, and the waiver creates a separate problem: offering the broker a lower-commission selling point in exchange for referrals gives the broker "something of value" for referrals in violation of Rule 7.2(a).

Q: When can a lawyer accept real estate referrals from a broker?

A: Per the opinion, where the lawyer has no financial interest in the broker's commission (as in N.Y. State 1208), the per se rule does not apply and the question becomes a fact-specific Rule 1.7(a)(2) analysis, with informed written consent under Rule 1.7(b) required if a significant risk exists.

Background and rules framework

The opinion interprets New York Rule 1.7(a)(2) (personal-interest conflicts), Rule 1.7(b) (conditions for waiver), and Rule 7.2(a) (payment for referrals; a lawyer shall not give anything of value to obtain a recommendation or as a reward for a referral resulting in employment). These correspond to ABA Model Rules 1.7 and 7.2. The committee builds on a long line of its own real estate lawyer-broker opinions treating the dual role as a non-consentable conflict.

Citations and references

Rules of Professional Conduct:

  • New York Rules of Professional Conduct 1.7(a)(2), 1.7(b), 7.2(a)
  • ABA Model Rules 1.7, 7.2 (analogues)

Other opinions cited:

  • N.Y. State 1043 (2015), 1177 (2017), 916 (2012), 933 ¶ 7 (2012), 1015 (2014): lawyer may not act as both lawyer and broker in the same transaction; per se non-waivable conflict
  • N.Y. State 1208 (2020): referrals from a paralegal-broker in whom the lawyer has no financial interest
  • N.Y. State 845 part C (2010): sharing a brokerage referral fee and remitting it to the client

See also

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