Can my firm place a lien on a client's property to secure unpaid attorney's fees?

Plain-English summary

The inquiring attorney represents a client in general civil litigation. The client agreed to pay fees at the close of the case but now lacks the means to pay, and has instead agreed that the firm may place a lien on the client's property for the amount owed. The attorney asked whether the firm may do so.

The panel concluded it is allowable. The Rules permit lawyers to accept non-monetary property as payment for services: Comment [4] to Rule 1.5 says a lawyer may accept property in payment provided it does not acquire a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8(i), but a fee paid in property may be subject to Rule 1.8(a) because such fees often have the essential qualities of a business transaction with the client. The panel had previously allowed an attorney to acquire a note and mortgage as a contingent fee, and cited ABA and New York City Bar opinions permitting a lawyer to secure a fee with an interest in the client's property.

Because the firm seeks a security interest adverse to the client, the panel concluded the requirements of Rule 1.8(a) must be met: the transaction and its terms must be fair and reasonable and fully disclosed in writing the client can reasonably understand; the client must be advised in writing of the desirability of, and given a reasonable opportunity to seek, independent legal counsel; and the client must give informed consent in a signed writing to the essential terms and the lawyer's role. The panel concluded the firm may place the lien if it satisfies these disclosure, fairness, and consent requirements.

In practice

Under this opinion, a firm may secure unpaid fees with a lien on the client's property, but the arrangement is a business transaction with the client governed by Rule 1.8(a). The panel held the firm must give the client fair, fully disclosed written terms, advise the client in writing to seek independent counsel and allow a reasonable opportunity to do so, and obtain the client's signed informed consent to the essential terms and the lawyer's role. The panel tied its conclusion to Comment [4] to Rule 1.5 and its prior Opinion 12-05.

Common questions

Q: Can a lawyer take a lien on a client's property instead of a cash fee?

A: Yes. The panel concluded a firm may place a lien on a client's property for the fees owed, treating it as accepting property in payment for services.

Q: What must the firm do to take the lien properly?

A: Comply with Rule 1.8(a): provide fair, fully disclosed written terms, advise the client in writing to seek independent counsel and allow a reasonable opportunity to do so, and obtain the client's signed informed consent.

Q: Why does Rule 1.8(a) apply to a fee lien?

A: Because acquiring a security interest adverse to a client has the essential qualities of a business transaction with the client. The panel relied on Comment [4] to Rule 1.5 and Comment [19] to Rule 1.8.

Q: Is there any limit on what property the lien can reach?

A: The panel noted, via Comment [4] to Rule 1.5 and Rule 1.8(i), that a lawyer may not acquire a proprietary interest in the cause of action or subject matter of the litigation.

Background and rules framework

The opinion applies Rule 1.8 (Model Rule 1.8, conflict of interest: current clients: specific rules), specifically Rule 1.8(a) governing business transactions with, and interests adverse to, a client, and references Rule 1.8(i) on proprietary interests in litigation. It also applies Rule 1.5 (Model Rule 1.5, fees), whose Comment [4] permits accepting property as payment while flagging that such fees may be governed by Rule 1.8(a). The panel relied on Comment [19] to Rule 1.8 and its prior Opinion 12-05.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (business transactions with a client under 1.8(a); proprietary interest under 1.8(i); Comment [19])
• MR 1.5 (fees; Comment [4] on property as payment)
• RI RPC 1.8, RI RPC 1.5

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• RI EAP Op. 12-05 (2012): attorney may acquire a note and mortgage as a contingent fee, subject to Rule 1.8(a).
• ABA Formal Op. 02-427 (2002): a lawyer may acquire a security interest in a client's property to secure a fee.
• New York City Bar Op. 1988-7 (1988): a lawyer may secure fees with a mortgage in the client's property if fair and with client consent.

See also

• RI EAP Op. 2025-11: May Settle a Client's Malpractice Claim Where the Client Had Independent Counsel
• RI EAP Op. 2022-01: May Not Condition a Settlement on Counsel Signing a Hold-Harmless Indemnity

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP-2023-02.pdf

Original opinion text

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

Rhode Island Supreme Court
Ethics Advisory Panel Op. 2023-2
Issued May 16, 2023

FACTS

The inquiring attorney represents a client in a general civil litigation matter. The client agreed to pay attorney's fees at the close of his/her case. The client now does not have the financial means to pay the attorney's fees. Instead, the client has agreed that the inquiring attorney's law firm can place a lien on his/her property for the amount owed.

ISSUE PRESENTED

The inquiring attorney asks whether it is permissible for his/her law firm to place a lien on the client's property.

OPINION

It is allowable for the inquiring attorney's law firm to place a lien on the client's property for the amount of attorney's fees owed. In acquiring this interest, the law firm must comply with the requirements of Rule 1.8(a).

REASONING

The Rules of Professional Conduct permit lawyers to accept non-monetary property as payment for legal services. Comment [4] to Rule 1.5, which governs fees, states:

. . . A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8 (i). However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a) because such fees often have the essential qualities of a business transaction with the client.

This Panel has previously read this provision to allow for an attorney to acquire a note and mortgage, as a contingent fee, on the property of his/her client that was the subject of an adverse possession claim. See Ethics Advisory Panel Op. 12-05 (2012). See also ABA Formal Ethics Op. 02-427 (2002) ("A lawyer may acquire a security interest in client's property to secure a fee."); New York City Bar Association's Comm. on Professional Ethics Op. 1988-7 (1988) (holding that a lawyer may secure payment of attorney's fees by obtaining a mortgage in his client's property provided the transaction is fair to the client and client consent is obtained).

The inquiring attorney, in a similar manner to the matter previously before the Panel, proposes acquiring a lien on his/her client's property in lieu of the originally agreed upon monetary payment. It is the Panel's opinion that this is permissible.

As the inquiring attorney seeks to obtain a security interest adverse to his/her client, the requirements of Rule 1.8(a) must be met. See Rule 1.8, Comment [1]. This is because arrangements for fees to be paid in non-monetary property have the essential qualities of a business transaction with a client. See Rule 1.5, Comment [4]; see also ABA Model Rules of Professional Conduct, Rule 1.8, Comment [19] ("When a lawyer acquires by contract a security interest in property other than that recovered through the lawyer's efforts in the litigation, such an acquisition is a business or financial transaction with a client and is governed by the requirements of paragraph (a).")

Rule 1.8 of the Rules of Professional Conduct entitled "Conflict of Interest: Current Clients: Specific Rules" states in pertinent part:

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.

As the Panel has explained, "a lawyer taking a security interest in a client's property must comply with the requirements of Rule 1.8(a) concerning disclosure, fairness, client consent, and the client's opportunity to seek independent counsel." See Ethics Advisory Panel Op. 12-05 (2012). It is the Panel's opinion that the inquiring attorney and his/her law firm must do the same.