Can a New York lawyer who owns a mortgage brokerage and a title abstract company also act as the lawyer for the buyer, seller, or lender in the same real estate deal?
Apply this to your situation
This page answers the general question as of 2002. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer was the sole shareholder of a licensed New York mortgage brokerage and a separate title abstract company, and asked whether, with disclosure and informed written consent, the lawyer (and the companies) could combine roles in a residential real estate deal: representing the buyer or the seller while also brokering the buyer's mortgage, acting as the lender's attorney at closing, and serving as the abstract company. The committee applied N.Y. State 752 (2002), which held that the dual-role bars built on DR 5-101(A) survive DR 1-106, and worked through each permutation.
On the lawyer-and-mortgage-broker combination, the committee held the broker's interest in closing (the broker is paid a percentage of the loan and only when it closes, often exceeding the legal fee) prevents the same lawyer from representing the buyer or seller while brokering the mortgage; the rationale of the real estate broker opinions (N.Y. State 208, 291, 340, 493) applies with full force. But the lender stands differently: it is a sophisticated commercial party that sets the product terms and pays the broker, can decline dual representation if it dislikes the incentives, and faces little negotiation in a residential mortgage. So with full disclosure and consent the lawyer may act as the lender's counsel while brokering that lender's mortgage.
On the lawyer-and-abstract-company combination, the committee followed N.Y. State 595, 621, and 738: a lawyer may act as the abstract company only for purely ministerial abstract searching, not where the company examines title and makes recommendations on insurability or exceptions, because that would require the lawyer to negotiate title problems with itself. That bar extends to counsel for the lender (N.Y. State 595). The committee also addressed the lender-and-borrower or lender-and-seller pairings under DR 5-105: representing the buyer and the lender together is barred where the lawyer would have to negotiate the loan terms (negotiating with oneself), but can be permissible with consent where there is no such negotiation (N.Y. State 8, 199, 438, 694); representing the seller and the lender, who usually do not negotiate directly, can likewise be permissible with consent absent a likely conflict (N.Y. State 611). Finally, the committee noted the proposed "Statement of Client's Rights in Cooperative Business Arrangements" (22 NYCRR 1205.4) did not fit these facts and advised a notice tailored to DR 1-106(A)(4) and DR 5-101(A) instead.
The opinion summarized its conclusions in a chart: with informed consent, the lawyer may act as mortgage broker only for the lender's lawyer ("Y"), not for the buyer's or seller's lawyer ("N"); may act as an insurance-providing or recommending abstract company for no party ("N"); and may act as a purely ministerial abstract company for any party ("Y").
In practice
The opinion holds that, under the New York Code as it stood in 2002, the lawyer-owner's permitted combinations turn on the role. The lawyer may not broker the mortgage while representing the buyer or seller, and may not provide non-ministerial title abstract work while representing any party to the deal. The lawyer may, with informed consent, represent the lender while brokering that lender's mortgage, and may provide purely ministerial abstract searching for any party.
The opinion also holds that pairing the lender's representation with the buyer's is barred where loan terms must be negotiated, but can be consentable where no negotiation occurs, and that representing the seller and the lender is generally consentable absent a likely conflict over title or closing conditions.
Common questions
Q: Can a lawyer broker the mortgage and also represent the buyer in the same purchase?
A: No. The opinion concludes the broker's interest in closing prevents the lawyer from also representing the buyer or seller while brokering the mortgage, even with consent.
Q: Can the lawyer broker the mortgage and represent the lender?
A: Yes, with informed consent. The opinion concludes the lender is a sophisticated party that can weigh the incentives, so the dual role of lender's counsel and mortgage broker for that lender is permissible with disclosure and consent.
Q: Can the lawyer's title abstract company work the deal while the lawyer represents a party?
A: Only for purely ministerial searching. The opinion concludes that if the company examines title and makes recommendations on insurability or exceptions, the lawyer would be negotiating title problems with itself, which is barred for any party.
Q: Can the same lawyer represent both the buyer and the lender?
A: Sometimes, with consent. The opinion concludes the dual representation is barred where loan terms must be negotiated, but can be permissible where there is no negotiation between borrower and lender.
Background and rules framework
The opinion interprets New York's former Code of Professional Responsibility: DR 5-101(A) (personal-interest conflicts), DR 5-105 (conflicts in simultaneous representation), DR 1-106 (non-legal services and the client-notice procedure), DR 1-107 (contractual relationships with non-legal professionals), and EC 1-14. The Model Rule analogues are Rule 5.7 (law-related services), Rule 1.7 (concurrent conflicts), and Rule 1.8(a) (business transactions with a client). New York replaced this Code with the Rules of Professional Conduct in 2009; the DR and EC numbers cited here are historical.
Citations and references
Rules of Professional Conduct:
- MR 5.7 (law-related services); MR 1.7 (concurrent conflicts); MR 1.8(a) (business transactions with a client)
- NY DR 5-101(A), DR 5-105, DR 1-106, DR 1-107, EC 1-14
Other opinions cited:
- N.Y. State 752 (2002): dual-role bars built on DR 5-101(A) survive DR 1-106
- N.Y. State 738 (2001): bar on the lawyer-owned abstract company doing non-ministerial title work
- N.Y. State 611 (1990): representing seller and lender can be permissible with consent absent a likely conflict
See also
- NY State Bar Op. 752: Dual-role bars survive DR 1-106
- NY State Bar Op. 755: Lawyer-owned ancillary business and cross-referrals
- NY State Bar Op. 1013: Lawyer-broker representing an owner in foreclosure
- NY State Bar Op. 1015: Lawyer-broker representing a seller with a flat fee
Source
- Landing page: https://nysba.org/ethics-opinion-753/
Get today's answer for your situation
You just read a 2002 opinion on this question. Ezel checks the current New York Rules of Professional Conduct and answers your specific situation, with citations.
Opens in Ezel Pro. Every answer cites the rules it relies on.