Can a bank's lawyer have the borrower pay his fee, and can he represent both the bank and the borrower at a mortgage closing?
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This page answers the general question as of 1976. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.
Plain-English summary
The committee considered a lending institution that required all mortgage papers to be prepared by its attorneys, who would represent only the bank at closings (the borrower having his own counsel), but whose fees the borrower would pay. The question was whether the bank's lawyer could collect his fee directly from the borrower. The committee noted it does not pass on questions of law or what constitutes unauthorized practice.
Assuming the arrangement was legal and set out in the contract, the committee held it not improper for a lending institution to employ an attorney to safeguard its interests and to require the borrower to pay that attorney directly for work actually performed (ABA Inf. 837 (1965); N.Y. City 695 (1946); cf. DR 5-107(A)). Quoting ABA Inf. 837, it observed that the bank has the right to choose an attorney, how he is paid is an economic matter, and he remains the bank's lawyer however paid. The opinion assumed the lawyer would charge the borrower only for legal services actually performed (N.Y. City 752 (1950)) and would retain those fees rather than turn them over to or divide them with the lender, which would be improper under DR 3-102 (dividing fees with a non-lawyer).
The committee added two safeguards. The attorney should disclose to the borrower, before the mortgage closes, the amount or manner of determining his fees (EC 2-19), and should clearly advise the borrower that the lender's counsel represents the mortgagee alone, leaving the borrower free to hire his own attorney. The opinion was limited to that single-representation setting; the lender's attorney could represent both mortgagee and mortgagor only if DR 5-105(C) were satisfied, that is, with the express consent of all concerned after full disclosure (see also DR 5-105(D)).
Currency note
This opinion was issued in 1976, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (concurrent conflicts are now governed by Rule 1.7 and sharing fees with non-lawyers by Rule 5.4). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can the borrower be required to pay the bank's attorney's fee?
A: Under this opinion, yes, for legal services actually performed, where the arrangement is legal and disclosed; the lawyer still represents only the lender.
Q: Can the lawyer share that fee with the bank?
A: Per the opinion, no. Turning the fee over to or dividing it with the lay lending institution would be improper fee-splitting with a non-lawyer under DR 3-102.
Q: Can the same lawyer represent both the bank and the borrower?
A: The committee held this dual representation is permissible only if DR 5-105(C) is met, requiring the express consent of all parties after full disclosure.
Q: What must the borrower be told?
A: The committee directed that the borrower be advised, before closing, of how the fee is set (EC 2-19) and clearly told that the lender's counsel represents the mortgagee alone, leaving the borrower free to retain his own lawyer.
Background and rules framework
The opinion applies the then-current New York Code's provisions on third-party fee payment and dual representation, DR 5-107(A), DR 5-105(C) and (D), DR 3-102 (dividing fees with non-lawyers), and EC 2-19 (fee disclosure). The current Model Rule analogues are Rule 1.7 (concurrent conflicts) and Rule 5.4 (professional independence; sharing fees with non-lawyers).
Citations and references
Rules of Professional Conduct:
- MR 1.7 (concurrent conflict of interest)
- MR 5.4 (professional independence; fee-sharing with non-lawyers)
- NY DR 5-105(C), (D); DR 5-107(A); DR 3-102; EC 2-19
Other opinions cited:
- ABA Inf. 837 (1965); N.Y. City 695 (1946): lender's counsel paid by the borrower remains the lender's lawyer
- N.Y. City 752 (1950): charges limited to services actually performed
See also
- NY State Bar Op. 461: Sharing a fire adjuster's commission
- NY State Bar Op. 1043: A referral fee from a real estate broker's commission
- NY State Bar Op. 1063: A conflict when fees are paid by a third-party relative
Source
- Landing page: https://nysba.org/opinion-438/
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