Can an Ohio lawyer take a mortgage on a client's home to secure payment of legal fees?

Plain-English summary

A lawyer asked whether she could secure her fees by having the client sign a promissory note backed by a mortgage on the client's residence, with the right to foreclose if the client does not pay. The Board concludes this is permitted, but only as a business transaction governed by Prof.Cond.R. 1.8(a).

The opinion treats a lawyer's acquisition of a security interest in a client's property (other than property recovered through the lawyer's efforts in litigation) as a business transaction adverse to the client. Under Prof.Cond.R. 1.8(a), the terms must be fair and reasonable, the client must be advised in writing of the chance to seek independent counsel, and the client must give informed consent in a writing the client signs. The opinion notes that informed consent requires the lawyer to discuss the material risks, the lawyer's role, other payment options, and why independent advice may be desirable.

The Board identifies the conflict the rule guards against: in a dispute over nonpayment, the client has an interest in stopping the lawyer from foreclosing, while the lawyer has a financial interest in enforcing the note, a personal-interest conflict under Prof.Cond.R. 1.7(a)(2). The opinion points to Ohio disciplinary cases (Lake Cty. Bar Assn. v. Davies and Disciplinary Counsel v. Bucio) where lawyers who took real-property interests without satisfying Prof.Cond.R. 1.8(a) were sanctioned. It also reminds lawyers that, separate from 1.8(a), the fee itself must remain reasonable under Prof.Cond.R. 1.5(a), citing Bucio, where a lawyer who kept property worth far more than his time collected a clearly excessive fee.

Opinion 2025-02 withdraws and replaces Adv. Op. 2004-08.

In practice

Under this opinion, an Ohio lawyer who takes a mortgage or other security interest in a client's property to secure fees is entering a business transaction with the client and must satisfy all three prongs of Prof.Cond.R. 1.8(a): fair and reasonable terms, written notice of the opportunity to consult independent counsel, and the client's signed informed consent. The opinion separates this from a security interest in property that is itself the subject of the litigation, which Prof.Cond.R. 1.8(i) permits without the 1.8(a) process when the interest is authorized by statute, common law, or contract.

The opinion also treats the reasonableness requirement of Prof.Cond.R. 1.5(a) as an independent limit: satisfying the 1.8(a) consent process does not cure a fee that turns out to be clearly excessive relative to the work performed.

Common questions

Q: Can an Ohio lawyer secure unpaid fees with a mortgage on the client's house?

A: Yes. The opinion concludes a lawyer may take a mortgage against a client's real property to secure fees, provided the arrangement satisfies Prof.Cond.R. 1.8(a).

Q: What does Rule 1.8(a) require for this kind of fee security?

A: Per the opinion, the terms must be fair and reasonable, the client must be advised in writing to consider independent counsel, and the client must give informed consent in a writing the client signs. Informed consent includes discussing the material risks, the lawyer's role, and other payment options.

Q: Does taking the mortgage create a conflict of interest?

A: The opinion identifies a personal-interest conflict under Prof.Cond.R. 1.7(a)(2): on nonpayment, the client wants to stop foreclosure while the lawyer wants to enforce the note. The 1.8(a) process is how the opinion addresses that conflict.

Q: Is a lien on property already at issue in the case treated differently?

A: Yes. The opinion explains that a security interest in property that is the subject of the litigation falls under Prof.Cond.R. 1.8(i) and is not subject to the 1.8(a) requirements when authorized by statute, common law, or contract.

Background and rules framework

The opinion interprets Ohio Prof.Cond.R. 1.8(a) (business transactions with a client; Model Rule 1.8(a)), Prof.Cond.R. 1.8(i) (acquiring an interest in the subject of litigation; Model Rule 1.8(i)), Prof.Cond.R. 1.5(a) (reasonable fees; Model Rule 1.5(a)), and Prof.Cond.R. 1.7(a)(2) (personal-interest conflicts; Model Rule 1.7(a)(2)). It relies on Comments [1], [2], and [16] to Rule 1.8 and on ABA Formal Opinion 02-427.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.8(a) / Ohio Prof.Cond.R. 1.8(a) (business transactions with a client)
• Model Rule 1.8(i) / Ohio Prof.Cond.R. 1.8(i) (interest in the subject of litigation)
• Model Rule 1.5(a) / Ohio Prof.Cond.R. 1.5(a) (reasonable fees)
• Model Rule 1.7(a)(2) / Ohio Prof.Cond.R. 1.7(a)(2) (personal-interest conflicts)

Cases:

• Lake Cty. Bar Assn. v. Davies, 2015-Ohio-4904, mortgage securing a flat fee; failure to advise client in writing of independent counsel violated Prof.Cond.R. 1.8(a)(2)
• Disciplinary Counsel v. Bucio, 2017-Ohio-8709, transfer of farmland without 1.8(a) disclosure and retention of excess sale proceeds as a clearly excessive fee
• N.Y. Ethics Adv. Op. 1104 (Oct. 5, 2016), rationale for treating fee-securing transactions as business transactions

Other opinions cited:

• ABA Formal Op. 02-427: security interest obtained by a lawyer to secure payment of a fee

See also

• ABA Formal Op. 02-427: Security Interest to Secure a Fee
• ABA Formal Op. 00-416: Purchase of Accounts Receivable From Client

Source

• Landing page: https://ohioadvop.org/advisory-opinion-index/
• Original PDF: https://www.ohioadvop.org/wp-content/uploads/2025/04/Adv.-Op.-2025-02-Final.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

OPINION 2025-02
Issued April 4, 2025
Withdraws Adv. Op. 2004-08

Acquiring Mortgage Against Client's Real Property to Secure Legal Fee

SYLLABUS: A lawyer may acquire a mortgage against a client's real property to secure the payment of legal fees provided the terms of the agreement satisfy the requirements of Prof.Cond.R. 1.8(a).

APPLICABLE RULES: Prof.Cond.R. 1.5, 1.8

QUESTION PRESENTED:

May a lawyer secure legal fees by having a client sign a promissory note secured by a mortgage against the client's residence?

ANALYSIS:

Background

The inquiring lawyer wishes to secure her legal fees by having the client sign a promissory note secured by a mortgage against the client's real property. Under the arrangement, the lawyer can foreclose on the mortgage to satisfy the promissory note if the client fails to pay the fees.

Security Interest as a Business Transaction

A lawyer is permitted to acquire a security interest adverse to the client to secure the lawyer's fee or expenses. Prof.Cond.R. 1.8, cmt.[16]; ABA Formal Op. 02-427. When a lawyer acquires a security interest in a client's property, other than that recovered by the lawyer's efforts in litigation, the acquisition is considered a business transaction that must comply with the requirements of Prof.Cond.R. 1.8(a). Prof.Cond.R. 1.8(a), cmt. [16]. The rule does not apply to ordinary fee arrangements between a lawyer and a client, but only to those instances when a lawyer "accepts an interest in the client's business or nonmonetary property as payment of all or part of a fee." Prof.Cond.R. 1.8(a), cmt.[1].

Prof.Cond.R. 1.8(a) requires that the terms of a business transaction between a lawyer and client be 1) fair and reasonable; 2) that the client be advised in writing of the opportunity to seek independent legal counsel; and 3) the client give informed consent, in a writing signed by the client, to the transaction. Prof.Cond.R. 1.8(a)(1)-(3). In order for the client to give his or her informed consent, the lawyer should discuss any material risks related to the transaction, the lawyer's role, the existence of other payment alternatives, and an explanation why the advice of independent counsel may be desirable. Prof.Cond.R. 1.8(a), cmt. [2]. See also Prof.Cond.R. 1.0(f),(i),(p) (definitions of informed consent, reasonable, and writing.)

Conflict of Interest

Prof.Cond.R. 1.8(a) governs a lawyer's business transactions with clients due to the risk that the lawyer's personal and financial interest could interfere with the lawyer's professional judgment on behalf of the client. N.Y. Ethics Adv. Op. 1104 (October 5, 2016). Based on the proposed transaction, "the client may be looking to the lawyer's professional judgment to understand the significance of the proposed mortgage and promissory note to the services for which the lawyer is being engaged." Id. In addition, the lawyer may seek to foreclose on the mortgage if the client fails to pay under the terms of the promissory note. This arrangement gives rise to a conflict of interest, as the client, in the event of nonpayment, would have an interest in preventing the lawyer from enforcing his or her rights under the promissory note and mortgage. See Prof.Cond.R. 1.7(a)(2).

Case Law

The failure to follow the enumerated requirements of Prof.Cond.R. 1.8(a) in business transactions involving real property has led to the imposition of disciplinary sanctions imposed against Ohio lawyers. For example, the lawyer in Lake Cty. Bar Assn. v. Davies, 2015-Ohio-4904, agreed to a promissory note secured by a mortgage from his client to pay for a flat fee for completed legal services. The lawyer's client later died, and the lawyer agreed to help the executor to administer the estate to secure proceeds from the sale of the home to satisfy the client's debt to the lawyer. The Supreme Court found that the lawyer violated Prof.Cond.R. 1.8(a)(2) when he had failed to advise the client in writing about the opportunity to obtain independent legal counsel before entering into the business transaction. Similarly, in Disciplinary Counsel v. Bucio, 2017-Ohio-8709, the lawyer's client transferred farmland to a real-state company owned by the lawyer's law firm. Before entering into the transaction with the client, the lawyer failed to comply with Prof.Cond.R. 1.8(a) by not fully disclosing to the client in writing the terms of the transaction, the desirability of seeking independent counsel, or obtaining the client's informed consent.

Reasonable Fee

In addition to the requirements of Prof.Cond.R. 1.8(a), lawyers must comply with Prof.Cond.R. 1.5(a) regarding the reasonableness of the fee when accepting an interest in a client's property to secure the payment of the lawyer's fees. Prof.Cond.R. 1.8, cmt.[1]. In Disciplinary v. Bucio, the lawyer later sold the farmland for $127,767 and retained the sale proceeds without any distribution to the client. The lawyer later admitted that he had spent only 40 hours working on the client's case and would have been entitled to $9,000 at his standard hourly rate. The lawyer stipulated that by accepting the land as payment through a business transaction, he had collected a clearly excessive fee in violation of Prof.Cond.R. 1.5(a).

Interest in Property at Issue in Litigation

A lawyer is also permitted to acquire a security interest in property that is the subject of litigation in which the lawyer represents the client when the lien is authorized by statute, common law, or contract and is obtained to secure the lawyer's legal fee or expenses. Prof.Cond.R. 1.8(i). An interest obtained under this division of the rule is not subject to the requirements of Prof.Cond.R. 1.8(a) and may be acquired before, during, or after the representation. ABA Formal Op. 02-427.