NYSBA 1991-04-18

Can a New York lawyer refer a real estate client to a title abstract company the lawyer owns and collect a share of the title premium?

Short answer: The opinion concluded that it is improper, per se, for a lawyer to refer a real estate client to an abstract company in which the lawyer has an ownership interest, because the personal-interest conflict cannot reliably be cured by disclosure and consent the way the attorney-agent situation can.

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 Not binding precedent.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.

NY State Bar Ethics Opinion 621: Referring real estate clients to an attorney-owned title abstract company

Short answer: The opinion concluded that a lawyer may not refer a real estate client to a title abstract company in which the lawyer holds an ownership interest, treating the conflict as one that cannot be cured by disclosure and consent.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association'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.

View original opinion

Plain-English summary

The committee reconsidered N.Y. State 595, which had held it improper for a lawyer to send a real estate client to an abstract company the lawyer owns, after the Real Property Law Section argued that the per se result was inconsistent with N.Y. State 576. N.Y. State 576 had permitted a lawyer who acts as agent for a title insurer to represent the insured real estate client and share in the premium, but only with disclosure, informed consent, and a credit to the client for the amount the lawyer received from the insurer. After written submissions and a day-long hearing, the committee adhered to N.Y. State 595 and explained why the abstract-company situation is different.

The committee located the two situations in different Disciplinary Rules. Where the lawyer is the title insurer's own agent and also represents the insured client, the conflict is between two clients and is governed by DR 5-105(C), which permits the dual representation only if it is obvious the lawyer can adequately represent each and each consents after full disclosure. Where the lawyer instead procures title insurance through an abstract company the lawyer owns, the abstract company has only a business relationship with the customer, not an attorney-client relationship, so the conflict is between the client's interest and the lawyer's own financial interest, governed by DR 5-101(A). The committee read the same "obviousness" test into DR 5-101(A).

The committee held that the safeguards that made the attorney-agent arrangement acceptable in N.Y. State 576 cannot be met by the attorney-owner. The abstract company is a separate legal entity whose share of the premium reaches the lawyer as a return on ownership rather than as payment for title services the lawyer personally rendered, so the quid pro quo of compensation for services actually rendered is absent. There is no workable way for the lawyer to credit the client with the lawyer's eventual dividend, so the fee-reduction safeguard of N.Y. State 351 and N.Y. State 576 cannot operate. And on questions like exceptions to title, the abstract company's employees may negotiate first, leaving the lawyer to negotiate against the lawyer's own company. The committee analogized the result to N.Y. State 208 (lawyer-broker), N.Y. State 516 (lawyer-life insurance agent), and N.Y. State 619 (lawyer-estate planner selling insurance). Four members dissented, arguing that the conflict is fundamentally the same as the attorney-agent conflict and that DR 5-101(A)'s consent provision should apply rather than a per se bar.

Currency note

This opinion was issued in 1991, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. 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 New York lawyer refer a real estate client to a title abstract company the lawyer owns?

A: No. The committee adhered to N.Y. State 595 and held the practice improper per se, because the lawyer's ownership interest creates a personal-interest conflict under DR 5-101(A) that cannot reliably be cured by disclosure and consent.

Q: Why is the attorney-owner treated differently from a lawyer who acts as the title insurer's agent?

A: The committee held that the agent's arrangement, approved in N.Y. State 576, depended on safeguards (payment limited to services actually rendered, a credit to the client for amounts received from the insurer, and no non-curable conflicts) that cannot plausibly be satisfied where a separate abstract company the lawyer owns renders the title services and pays the lawyer through ownership returns.

Q: Which rule governs the conflict?

A: DR 5-101(A), which bars a lawyer, absent consent after full disclosure, from representing a client where the lawyer's professional judgment will be or reasonably may be affected by the lawyer's own financial or business interest. The committee read the "obviousness" test of DR 5-105(C) into DR 5-101(A) and concluded the obviousness barrier could not be surmounted here.

Background and rules framework

The opinion interpreted DR 5-101(A) (declining or continuing employment when the lawyer's own financial, business, property, or personal interests may affect professional judgment) and contrasted it with DR 5-105(C) (multiple-client representation permitted only on the obviousness-plus-consent standard), with EC 5-2. The closest Model Rule analogues are Rule 1.7(a)(2) (a concurrent conflict arising from the lawyer's personal interest) and Rule 1.8(a) (business transactions and interests adverse to a client).

Citations and references

Rules of Professional Conduct:

MR 1.7 (concurrent conflicts of interest, including personal-interest conflicts)
MR 1.8 (business transactions with a client; conflicting interests)
NY DR 5-101(A); DR 5-105; DR 5-105(C); EC 5-2

Other opinions cited:

N.Y. State 595: the per se bar this opinion reconsidered and reaffirmed
N.Y. State 576 (1986): attorney-agent for a title insurer may share the premium with disclosure, consent, and a fee credit
N.Y. State 351 (1974): requirement to credit the client with amounts received from the title company
N.Y. State 208 (1971); N.Y. State 516 (1980); N.Y. State 619 (1991): analogous personal-interest conflicts barred
ABA Formal Op. 331 (1972): lawyer with a financial interest in a title company (cited by the dissent)

Source

Landing page: https://nysba.org/opinion-621/