Ezel / Ethics Opinions / NYSBA
NYSBA March 27, 2012

Can a New York lawyer acting as the broker in a real estate deal throw in free legal services if the client is told they may hire separate counsel?

Short answer: No. A lawyer acting and being paid as the broker may not offer free legal services to a party in the same transaction, even with disclosure that the party may retain separate counsel; the broker's financial stake in closing is a non-consentable conflict.

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This page answers the general question as of 2012. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2012
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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 Not binding precedent.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 on this page) is the authoritative source for any reliance.

Plain-English summary

A lawyer asked whether, while serving and being paid as a real estate broker in a transaction, the lawyer could also offer free legal services on the contract and other legal matters in the same deal, with disclosure that the party is free to retain separate counsel. The committee answered no (paragraph 1).

The committee relied on its long line of opinions (N.Y. State 208, 291, 340, 493, and later 752) holding that a lawyer cannot act as lawyer in the same transaction in which the lawyer or the lawyer's spouse acts as broker, because of the conflict between the client's interests and the lawyer's own (paragraph 2). The rationale, now embodied in Rule 1.7(a), is that the broker's personal and financial interest in closing the deal interferes with the lawyer's ability to give independent advice. The problem stems not from the fee for legal advice but from the separate financial interest arising from the non-legal (brokerage) compensation, an influence the committee said informed consent cannot relieve (paragraph 3).

Offering the legal services for free does not remedy that conflict; if anything, the client's natural attraction to the cost savings reinforces the concern (paragraph 4). A lawyer rendering free legal services still owes the duty of independent professional judgment, which a reasonable lawyer could not provide where there is a significant risk that the lawyer's personal financial interest as broker would adversely affect that judgment. Advising the client that it could hire another lawyer, which the committee called the functional equivalent of the consent it has already found inadequate, does not eliminate the problem (paragraph 4).

In practice

The opinion holds that a lawyer-broker's offer of free legal services in a transaction the lawyer is brokering is impermissible under the principles embodied in Rule 1.7(a), and that the conflict is non-consentable. The committee treats the disclosure that the client may hire separate counsel as no cure, because it is functionally the same consent the committee has repeatedly held cannot relieve the lawyer-broker conflict.

Common questions

Q: I am the broker on a deal. Can I give the buyer free legal help on the contract?

A: No. The committee held that a lawyer acting and being paid as broker may not provide free legal services to a party in the same transaction, because the broker's stake in closing is a non-consentable conflict under the principles of Rule 1.7(a) (paragraphs 4, 5).

Q: Does offering the legal work for free fix the conflict?

A: No. The committee said free services do not remedy the conflict and that the client's attraction to the cost savings only reinforces the concern; the lawyer still owes independent professional judgment that the broker's financial interest jeopardizes (paragraph 4).

Q: What if I tell the client they can hire their own lawyer instead?

A: That does not cure it. The committee treated advising the client to retain separate counsel as the functional equivalent of consent, which it has found inadequate to relieve the lawyer-broker conflict (paragraph 4).

Background and rules framework

The opinion applies the conflict principles embodied in New York Rule 1.7(a), corresponding to ABA Model Rule 1.7. The analysis rests on the committee's settled view that a lawyer's financial interest as broker (or other non-legal service provider such as an insurance or securities broker) in closing a transaction is a conflict that client consent cannot waive, so the form of the legal fee, free or paid, does not change the result.

Citations and references

Rules of Professional Conduct:

  • MR 1.7 / NY Rule 1.7(a): conflict from the lawyer's own financial or personal interest

Other opinions cited:

  • N.Y. State 208 (1971), 291 (1973), 340 (1974), 493 (1978): lawyer (or spouse) may not be both lawyer and broker in the same deal
  • N.Y. State 752 (2003): collecting the lawyer-broker line under the current Rules
  • N.Y. State 536 (1981), 619 (1991), 738 (2001): similar results for insurance brokers, securities brokers, and title examiners
  • N.Y. County 685 (1991): accord

See also

Source

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