Ezel / Ethics Opinions / NYSBA
NYSBA 2012-12-17

Can a lawyer who regularly represents a lender also represent the buyer at residential closings when the lender pays most of the buyer's legal fee as a promotion?

Short answer: No. The lawyer's regular lender relationship and the lender's payment of most of the buyer's fee create a Rule 1.7 conflict that is nonconsentable, because the lawyer cannot reasonably believe he could give the buyer competent, diligent representation in that arrangement.
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.
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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 952: Representing both lender and buyer when the lender pays the buyer's fees

Short answer: A lawyer who regularly represents a lender at residential closings may not also represent the buyers in a promotional arrangement where the lender pays most of each buyer's legal fee. The arrangement is a Rule 1.7 concurrent conflict that is nonconsentable, because the lawyer could not reasonably believe he could provide the buyer competent and diligent representation given his strong financial stake in the lender relationship.

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.

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Plain-English summary

A lawyer regularly represents a lender in residential real estate closings, charging the lender $450 per closing and typically also representing the buyer for $275 on both clients' written consent. The lender proposed a promotion: buyers would pay the lender only $25, the lender would add $250 and pay the lawyer the usual $275 buyer fee (plus its own $450), and the lender would advertise the deal to attract more buyers. The lawyer asked whether he could represent both and accept the lender's payment.

The committee finds a concurrent conflict under both prongs of Rule 1.7(a). Under 1.7(a)(1), representing a residential buyer and lender involves differing interests, because the buyer executes a note and mortgage to the lender and the parties can diverge on issues negotiated with the seller. Under 1.7(a)(2), the lawyer's regular lender relationship and income stream create a personal business interest that poses a significant risk to his judgment for the buyer (citing N.Y. State 753 (2002) and N.Y. State 867 (2011)).

The decisive question is consentability under Rule 1.7(b). A waiver is available only if the lawyer reasonably believes he can competently and diligently represent both (Comment [15]). Drawing on N.Y. State 867, the committee notes the typical residential buyer is relatively unsophisticated compared to an institutional lender whose size and business potential give it a stronger pull on the lawyer. Here the factors against consentability are even stronger: the lawyer intends to represent the lender regularly and earns far more from it, the lender's fee dwarfs the buyer's, and the lender pays most of the buyer's fee and promotes the arrangement to draw in buyers. On those facts, a lawyer could not reasonably believe he could competently and diligently represent both, so the conflict is nonconsentable.

The committee notes the fee arrangement also raises questions under Rule 1.8(f) (third-party payment) and that having the buyer pay the lender, which would "provide" representation, implicates Judiciary Law 495, but it does not reach those questions given the nonconsentable conflict.

In practice

The opinion holds that, under the New York rules as they stood in 2012, a lawyer who regularly represents a lender cannot also represent buyers in a series of closings where the lender pays most of the buyers' fees, because the conflict is nonconsentable. The committee identifies the controlling factors as the lawyer's outsized financial dependence on the lender, the buyer's relative lack of sophistication, and the lender's payment of and promotion around the buyer's fee, which together defeat any reasonable belief in competent, diligent dual representation. The committee did not decide the separate Rule 1.8(f) and Judiciary Law 495 questions.

Common questions

Q: Can one lawyer represent both the buyer and the lender at a residential closing?

A: Sometimes, with consent, but not here. Paragraph 7 treats lender-buyer representation as a conflict that is sometimes consentable, but paragraph 15 finds it nonconsentable on these facts.

Q: What makes this particular arrangement a nonconsentable conflict?

A: The lawyer's regular, lucrative lender relationship plus the lender paying most of the buyer's fee. Per paragraphs 13 to 15, those factors mean the lawyer cannot reasonably believe he could competently and diligently represent the buyer.

Q: Is it a problem for the lender to pay the buyer's legal fee?

A: It raises questions under Rule 1.8(f) and Judiciary Law 495. Per paragraph 16, the committee flags these but does not decide them, because the nonconsentable conflict already bars the representation.

Background and rules framework

The opinion interprets Rule 1.7(a) and (b) (Model Rule 1.7, concurrent conflicts and their waiver) and Rule 1.8(f) (Model Rule 1.8(f), third-party payment), using the Rule 1.0 definitions of "differing interests," "reasonable lawyer," and "reasonably believes." It treats N.Y. Judiciary Law 495 (corporate practice of law) as a backdrop question it does not resolve.

Citations and references

Rules of Professional Conduct:

  • MR 1.7 / NY Rule 1.7(a), (b) (concurrent conflicts; consentability), Comment [15]
  • MR 1.8 / NY Rule 1.8(f) (compensation from a third party)

Statutes:

  • N.Y. Judiciary Law 495 (corporations may not furnish legal services)

Other opinions cited:

  • N.Y. State 753 (2002); N.Y. State 867 (2011); N.Y. State 438 (1976); N.Y. State 199 (1971): lender-buyer and lender-seller dual representation and consentability.
  • Nassau County 98-10: purchaser-lender interests typically cannot be adequately represented by the same attorney.

See also

Source