In a residential loan closing, what must the lender's attorney tell an unrepresented borrower, and when can the same attorney represent both sides?

Plain-English summary

A bank made residential purchase-money and refinancing loans. Its loan officers did not tell borrowers they needed an attorney or ask for the borrower's attorney; instead they told borrowers the bank would send the papers to its attorney (Attorney X) or that Attorney X handled the bank's loan matters. Attorney X prepared the loan documents, certified title to the bank, billed the borrower, arranged execution of the documents, and was also the named trustee on the deed of trust. The committee answered several questions about the lender's attorney's duties to the borrower.

The controlling rules were DR 5-101(A) (personal-interest conflicts), DR 5-104(A) (business transactions with a client), DR 7-103(A)(2) (the only advice to an unrepresented opposing party is to secure counsel), and DR 7-103(B).

The committee concluded that, although a bank may choose its own counsel, if the attorney represents only the lender, that fact should be communicated to the borrower so the borrower may exercise the right to independent counsel; the legality of billing the borrower for the lender's attorney's services turned on Va. Code § 6.1-330.70 et seq., beyond the committee's purview. It held the borrower has the right to independent counsel, but the Disciplinary Rules do not require the bank's attorney to advise the borrower of that right. Because DR 7-103(A)(2) limits advice to an unrepresented party to the advice to seek counsel, a lender-only attorney need not advise the borrower that the title insurance obtained protects only the lender or that the borrower could obtain his own (citing LE Op. 1153 on disclosure of multiple representation). The committee concluded it is not per se improper for an attorney to serve as a bank's counsel and a board member, but if the attorney represents the lender and also serves the lender in another capacity (board, loan committee), full and adequate disclosure and the borrower's consent are required before the attorney may represent both borrower and lender. Finally, where the attorney represents both but obtains title insurance only for the lender, the attorney must advise the borrower as to the nature, benefits, and availability of title insurance.

Currency note

This opinion was issued in 1991, under Virginia's former Code of Professional Responsibility (the disciplinary rules it cites), before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000. 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, deadline, or requirement mentioned here.

Common questions

Q: Must a lender's attorney tell the borrower he represents only the lender?

A: Under this 1991 opinion, yes, that fact should be communicated to the borrower so the borrower may exercise the right to independent counsel. But the committee held the rules do not require the attorney to advise the borrower of that right beyond the advice to seek counsel.

Q: Can the borrower be billed for the lender's attorney's services?

A: The committee said the legality of that billing turned on Va. Code § 6.1-330.70 et seq., which was beyond its purview to interpret.

Q: When can one attorney represent both the lender and the borrower?

A: The committee held that where the attorney represents the lender and also serves it in another capacity (such as on its board or loan committee), full disclosure and the borrower's consent are required before representing both; and if title insurance is obtained only for the lender, the attorney must advise the borrower about the nature, benefits, and availability of title insurance.

Background and rules framework

The opinion interpreted former Virginia DR 5-101(A), DR 5-104(A), DR 7-103(A)(2), and DR 7-103(B), along with Va. Code § 6.1-330.70 et seq. on loan-related charges. Dealings with unrepresented persons are now governed by Virginia Rule 4.3, concurrent conflicts by Rule 1.7, and business transactions with a client by Rule 1.8.

Citations and references

Rules of Professional Conduct:

• Former Virginia DR 5-101(A); DR 5-104(A); DR 7-103(A)(2); DR 7-103(B) (Code of Professional Responsibility)
• ABA Model Rule 4.3 (unrepresented persons); Model Rule 1.7 (concurrent conflicts); Model Rule 1.8 (business transactions with a client)

Statutes:

• Va. Code § 6.1-330.70 et seq. (loan-related charges).

Other opinions cited:

• Virginia LE Op. 747, 1120, 1151, 1153: representation of lender and borrower and disclosure of multiple representation.

See also

• VA LEO 1466: Wet Settlement Act, Separate Closing Counsel
• VA LEO 1457: Preparing a Corporate Constituent for Deposition
• VA LEO 1448: Advising a Client to Secretly Record

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1436.pdf

Original opinion text

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

Committee Opinion
November 1, 1991
LEGAL ETHICS OPINION 1436

REAL ESTATE REPRESENTATION –
CONFLICT OF INTEREST - MULTIPLE
REPRESENTATION: LENDER'S
ATTORNEY ADVISING
UNREPRESENTED BORROWER.

Bank A, a state chartered bank and member of F.D.I.C., makes purchase money loans
and refinancing loans on residential property. The loan officers of Bank A do not advise
borrowers that they need an attorney for the transaction nor are the borrowers asked the
name of their attorney. Rather, borrowers are told by the loan officers either that the
bank will send the papers to its attorney, Attorney X, or that Attorney X handles
loan matters for it. Attorney X then prepares the loan documents, certifies title to Bank A,
bills the borrower and either sends the documents to the borrower for signatures or
advises the borrower of the date and time to come to the law office for the execution of
the documents. Attorney X is also the named trustee on the deed of trust.
On several questions related to the facts presented, the Committee opined as follows:
1. Although the Committee has previously opined that a bank, like an individual, has
the right to secure legal counsel of its choice to protect its interest, as well as the interest
of the shareholders and customers, under the present facts, the Committee opined that, if
the attorney is engaged to represent the lender only, that fact should be communicated to
the borrower so that the borrower may exercise his right to independent counsel of his
choice.
The question posed regarding the legality of the bank's billing of the borrower for the
lender's attorney's services, may be resolved by attention to Va. Code § 6.1-330.70 et
seq., the interpretation of which is beyond the purview of this Committee.
2. The borrower has the right to independent counsel to protect his interest in the
transaction. The Committee is of the opinion that the Disciplinary Rules do not require
the bank's attorney to advise the borrower of his right to obtain independent counsel.
3. Since DR:7-103(A)(2) mandates that the only advice which can be given to an
unrepresented opposing party is the advice to seek counsel, the Committee opined that,
where the attorney represents only the lender, that attorney is not required to advise the
borrower that the title insurance obtained is for the lender only and that the borrower
could obtain title insurance in borrower's name to protect his equity.
4. The Committee referred the inquirer to prior LE Op. 1153 which requires disclosure
of multiple representation when the attorney representing the lender also represents the
borrower.
5. It is not per se improper for an attorney to serve as counsel for a bank as well as
being a member of its board of directors; however, under the facts presented, the
Committee opined that if the attorney represents the lender and serves in another capacity

Committee Opinion
November 1, 1991
for lender, such as on its board of directors, loan committee, or other committee, full and
adequate disclosure must be made, and consent received from, the borrower before
the attorney may represent both borrower and lender.
6. Where the attorney represents the lender and the borrower but obtains title insurance
only for the lender, the Committee is of the opinion that the attorney must advise the
borrower as to the nature, benefits, and availability of title insurance. [ DR:5-101(A),
DR:5-104(A), DR:7-103(A)(2), DR:7-103(B); LE Op. 747, LE Op. 1120, LE Op. 1151,
LE Op. 1153; Va. Code § 6.1-330.70, et seq.]