Can a lawyer take a mortgage, or a deed, on the client's property to secure payment of the lawyer's fee?
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This page answers the general question as of 1983. 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 was asked whether a lawyer may take a mortgage, and separately whether a lawyer may take a deed, to secure payment of the lawyer's fee. It reaffirmed the long-accepted proposition that a lawyer may with ethical propriety receive security for a fee, including a mortgage on real estate, reasoning that if a lawyer may require a retainer in advance there is no reason he cannot receive security in lieu of a retainer, whether the matter is civil or criminal.
The committee attached several conditions to taking a mortgage. The fee must be in an ethically appropriate amount, with a clear, explicit, and clearly communicated basis, preferably in writing (EC 2-19). If a future fee is being secured, the arrangement should not be on a quantum meruit basis, because that could let the lawyer later use the mortgage as a bargaining weapon over the fee. If the fee has already been earned, the lawyer may not threaten collection to obtain the mortgage except as justified under EC 2-23, and may not exert undue pressure. The lawyer should act with restraint in electing to foreclose or in urging the client to sell the mortgaged property, deferring for a reasonable time in a depressed market so the client may realize a fair amount. If the lawyer participates in any way in a voluntary sale of the mortgaged property, the transaction falls under DR 5-104(A) as a business transaction with a client, where the burden is on the lawyer to show no overreaching and a full and fair price; and the lawyer should in no event be the purchaser unless the client has independent legal advice.
On the deed, the committee reached a different result. Unlike a mortgage, where the law gives the mortgagor important protections on foreclosure, a deed taken as security deprives the client of those protections and exposes the client to potential overreaching, so the committee held a lawyer may not properly accept a deed as security for a fee. Recognizing that some lawyers may in good-faith reliance on EC 5-7 have taken deeds without abuse, it said its interpretation should not be applied retroactively for discipline absent evidence of actual abuse. The first question was answered in the affirmative subject to the conditions, and the second in the negative.
Currency note
This opinion was issued in 1983, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (business transactions with clients are now governed by Rule 1.8(a) and fees by Rule 1.5). 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 a lawyer take a mortgage to secure a fee?
A: Yes, subject to conditions. The committee held it proper provided the fee is appropriate and clearly communicated, future fees are not on a quantum meruit basis, there is no undue pressure, and the lawyer shows restraint on foreclosure.
Q: Can a lawyer take a deed to secure a fee?
A: No. The committee held a deed deprives the client of the protections of foreclosure and invites overreaching, so taking a deed as security is improper.
Q: What happens if the lawyer participates in selling the mortgaged property?
A: The committee held that brings the matter within DR 5-104(A) as a business transaction with a client, putting the burden on the lawyer to show no overreaching and a full and fair price; the lawyer may not buy the property unless the client has independent legal advice.
Background and rules framework
The opinion applied DR 5-104(A) (business transactions with a client) and EC 2-19, 2-23, and 5-7 to a lawyer taking a security interest for a fee. The closest current Model Rule analogues are Rule 1.8 (business transactions with a client; Rule 1.8(a) and (i)) and Rule 1.5 (fees).
Citations and references
Rules of Professional Conduct:
- MR 1.8 (current clients: specific rules; business transactions, proprietary interest)
- MR 1.5 (fees)
- NY DR 5-104(A); EC 2-19; EC 2-23; EC 5-7
Other opinions cited:
- N.Y. State 253 (1972): a lawyer may take a mortgage to secure a fee; no quantum meruit basis for future fees
- ABA Inf. 593 (1962): lump-sum fee secured in advance
See also
- NY State Bar Op. 553: Lending a client money to bid on marital property
- NY State Bar Op. 567: Retaining lien and fee-dispute litigation
- NY State Bar Op. 582: Attorney retaining interest on the escrow float
Source
- Landing page: https://nysba.org/opinion-550/
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