I want to team up with two of my clients to buy real estate from two other clients of mine, who've agreed to get independent legal and accounting advice for the deal. Can I participate as a purchasing partner?

Plain-English summary

An attorney asked the panel whether he could properly participate in submitting an offer to two of his clients, Mr. and Mrs. Z, to purchase their real estate. He told the panel that his own interest in becoming a purchaser was welcomed by Mr. and Mrs. Z, and that two other clients of his were interested in joining him as partners for the purchase. He also advised the panel that all parties had mutually agreed that, if he and his clients submitted an offer, Mr. and Mrs. Z would engage an independent attorney and an independent accountant to advise them on the transaction.

The panel quoted Rule 1.8(a), which bars a lawyer from entering into a business transaction with a client, or knowingly acquiring an ownership, possessory, security, or other pecuniary interest adverse to a client, unless three conditions are met: the transaction and its terms are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner the client can reasonably understand; the client is given a reasonable opportunity to seek independent counsel's advice on the transaction; and the client consents in writing. The panel held that if the attorney complied with these disclosure, fairness, and consent requirements, it was proper for him to participate in the purchasing partnership and submit the offer as outlined.

Currency note

This opinion was issued in January 1989, shortly after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.8(a) as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can I team up with clients to buy property from other clients of mine?

A: Yes, according to this opinion, provided the selling clients have the transaction's terms fully disclosed to them in writing in an understandable way, a reasonable opportunity to obtain independent counsel, and give written consent, per Rule 1.8(a).

Q: Does it matter that the sellers agreed in advance to get independent legal and accounting advice?

A: The opinion notes this arrangement as part of the facts the panel evaluated, consistent with Rule 1.8(a)'s requirement that the client have a reasonable opportunity to seek the advice of independent counsel in the transaction.

Background and rules framework

The opinion applies Rule 1.8(a) of the Rhode Island Rules of Professional Conduct, as adopted effective November 15, 1988, which conditions a lawyer's business transaction with a client on fairness, full written disclosure, an opportunity to seek independent counsel, and written client consent, to a lawyer's proposed participation as a purchasing partner buying real estate from two other clients.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (conflict of interest, current clients: specific rules)
• RI RPC 1.8(a) (business transactions with a client)

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• ABA Formal Opinion 00-416: Purchase of Accounts Receivable From a Client: another Rule 1.8(a) business-transaction-with-a-client opinion.

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%2088-31.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

DIGEST OF ETHICS ADVISORY PANEL
Opinion #88-31, Request #41
Issued January 12, 1989

An attorney seeks Panel advice as to whether he may properly participate in the submission of an offer to two clients, Mr. and Mrs. Z, for the purchase of their real estate. The attorney advises the Panel that his interest in being a purchaser is welcomed by Mr. and Mrs. Z. He also states that two other clients of his are interested in becoming his partners for purposes of this purchase. Finally, the attorney advises the Panel that it has been mutually agreed that if he and his clients submit an offer to Mr. and Mrs. Z, Mr. and Mrs. Z will engage an independent attorney and an independent accountant to advise them.

Rule 1.8(a) provides:

(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 to the client in a manner which can be reasonably understood by the client;

(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and

(3) the client consents in writing thereto.

The Panel takes the position that if the attorney complies with the requirements concerning disclosure, fairness and client consent set forth above then it is proper for him to participate in the partnership arrangements and the submission of an offer to purchase which he has outlined.

Ethics Advisory Panel advice is protective in nature. There is no requirement that an attorney abide by a Panel opinion, but if he or she does, he or she is fully protected from any charge of impropriety.