Can a divorce lawyer take an assignment of the proceeds from the sale of the client's marital home to secure payment of the fee?

Plain-English summary

The inquiry posed two hypotheticals. In the first, a divorce client who could not keep current on hourly fees wanted to pay the lawyer from proceeds the client would receive for selling a share of the marital home to the opposing party, and the lawyer wanted the client to sign an assignment directing payment to the lawyer at closing. In the second, the parties had signed a property settlement agreement giving the client all proceeds from the sale of the marital home, but no final decree had yet been entered; the lawyer asked whether the assignment could be executed before the final decree.

The controlling rules were DR 5-103(A), barring a lawyer from acquiring a proprietary interest in the cause of action or subject matter of litigation, and DR 5-104(A), barring a business transaction with a client where the client expects the lawyer to exercise professional judgment, unless the client consents after full and adequate disclosure and the transaction is not unconscionable, unfair, or inequitable. The committee quoted EC 5-7's policy that a lawyer should not acquire a proprietary interest in a client's cause, though a lawyer may protect the right to a fee through legally permissible liens.

Drawing on LE Op. 1390, the committee reasoned that acquiring an interest in a marital home whose value is not yet determined and is the subject of an equitable-distribution hearing gives the lawyer a proprietary interest in the divorce action, an unacceptable risk to the lawyer's independent judgment that the client's consent cannot cure. On the first hypothetical, because the parties had not resolved the value of or their respective interests in the property, unresolved litigation issues remained, so an assignment would be improper under DR 5-103(A) and DR 5-104(A). On the second, even though a property settlement agreement existed, the committee held the rules require that a final decree or order incorporating the agreement be entered before the lawyer may acquire any interest in the property or its proceeds, given how volatile marital-property matters can be.

The committee summarized that a lawyer may not take an interest in marital property, or its sale proceeds, to secure fees unless a final order or decree has conclusively adjudicated all issues over the use, possession, division, and sale of the property, and then only if the client consents after full and adequate disclosure, the transaction is fair and reasonable given the client's sophistication and ability to pay, and the client is advised of and given the opportunity to seek independent counsel.

Currency note

This opinion was issued in 1995, under Virginia's former Code of Professional Responsibility (the disciplinary rules and ethical considerations 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: Can a divorce lawyer take an assignment of the client's share of the marital home to get paid?

A: Under this 1995 opinion, not while the property is still subject to the divorce. The committee concluded that taking an interest in marital property whose value or division is unresolved gives the lawyer an improper proprietary interest in the litigation, which the client's consent cannot cure.

Q: Does a signed property settlement agreement let the lawyer take the assignment early?

A: No. The committee held that even with a property settlement agreement, a final decree or order incorporating it must be entered before the lawyer may acquire any interest in the property or its sale proceeds.

Q: Once the property issues are finally resolved, what does the lawyer still need?

A: The committee said the lawyer needs the client's informed consent after full and adequate disclosure, a transaction that is fair and reasonable given the client's sophistication and ability to pay, and advice to the client of the right to seek independent counsel.

Background and rules framework

The opinion interpreted former Virginia DR 5-103(A) (no proprietary interest in the cause or subject of litigation) and DR 5-104(A) (business transactions with a client require informed consent and fair terms), with the policy of EC 5-7. Those provisions are now carried forward in Virginia Rule 1.8(a) (business transactions with clients) and Rule 1.8(i) (proprietary interest in litigation), the analogs to ABA Model Rule 1.8.

Citations and references

Rules of Professional Conduct:

• Former Virginia DR 5-103(A); DR 5-104(A); EC 5-7 (Code of Professional Responsibility)
• ABA Model Rule 1.8(a), (i) (business transactions with clients; proprietary interest in litigation)

Cases:

• People v. Franco, 690 P.2d 230 (Colo. 1985), discipline where a lawyer took a deed of trust in a marital home to secure fees.
• In re May, 96 Idaho 858, 538 P.2d 787 (1975), discipline where a lawyer had a client assign an interest in the marital home to secure divorce fees.

Other opinions cited:

• Virginia LE Op. 1390: acquiring an interest in a marital home still subject to equitable distribution is an improper proprietary interest.
• Maine Ethics Op. 117 (1991); Massachusetts Bar Op. 91-1 (1991): a lawyer may take security in marital property only once the divorce is final and residual property disputes are concluded.

See also

• VA LEO 1747: Honoring a Lien on Settlement Funds
• VA LEO 1739: Referral Fees Without Responsibility
• VA LEO 1732: Departing-Lawyer Fee-Split Clause

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1653.pdf

Original opinion text

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

Committee Opinion
September 21, 1995
LEGAL ETHICS OPINION 1653

FEES; EMPLOYMENT AGREEMENTS;
ASSIGNMENT OF PROCEEDS
EXPECTED FROM SALE OF PROPERTY
IN DIVORCE TO PAY ATTORNEY'S
FEE.

You have presented a hypothetical situation in which it is proposed that a client sign a
written employment agreement to pay fees on an hourly rate within 30 days of billing.
Litigation has been more expensive than contemplated and client has been unable to keep
current on payments. The client and the client's spouse own, as tenants by the entireties
with rights of survivorship, the marital domicile with equity far in excess of attorney's
fee. Opposing party wishes to purchase client's share of equity in the property, and client
is agreeable. Client wants to pay the attorney from proceeds received for client's share of
the marital domicile. Attorney would like to have client sign an assignment of those
funds directing that payment be made directly to attorney at closing.
Your second hypothetical involves a client signing an employment agreement agreeing
to pay fees on an hourly basis. Litigation costs have exceeded expectations and the bill
now amounts to several thousand dollars. The client has been unable to keep current and
advised attorney she will pay the fee when the marital domicile, which is currently on the
market, is sold. Under a property settlement agreement, the client will receive all
proceeds from the sale and there is equity in the real estate in excess of the amount of the
attorney's fee. The attorney proposes to have the client execute an assignment for the
amount of the fee to be presented to the settlement agent directing that payment be made
directly to the attorney from sale proceeds at closing. Since a final decree is not yet
entered, Attorney inquires as to whether the assignment may be executed prior to entry of
the final decree or whether Attorney must wait until after a final decree has been entered
incorporating the property settlement agreement.
Under the facts you have presented, you have asked the committee to opine as to the
propriety of these agreements to pay attorney's fees and whether either situation
constitutes taking an interest in marital property.
The appropriate and controlling disciplinary rules relative to your inquiry are DR:5103(A) prohibiting a lawyer from acquiring a proprietary interest in the cause of action or
subject matter of litigation; and, DR:5-104(A) prohibiting a lawyer from entering into a
business transaction with a client where the client expects the lawyer to exercise his
professional judgment, unless the client has consented after full and adequate disclosure
and only if the transaction is not unconscionable, unfair or inequitable when made.
The policy embodied in DR:5-103(A) is that:
The possibility of an adverse effect upon the exercise of free judgment by a lawyer on
behalf of his client in litigation generally makes it undesirable for the lawyer to
acquire a proprietary interest in the cause of his client or otherwise to become

Committee Opinion
September 21, 1995
financially interested in the outcome of the litigation. However, it is not improper for
a lawyer to protect his right to collect a fee for his services by the assertion of legally
permissible liens, even though by doing so he may acquire an interest in the outcome
of litigation . . . EC:5-7.
The committee has previously opined that the acquisition by the attorney of an interest
in the marital home, the value of which is not yet determined and is the subject of an
equitable distribution hearing, would give the lawyer a proprietary interest in the divorce
action. Such a financial interest would inappropriately interject the lawyer's personal
interests into the issues of the case. Thus, such a transaction would create an unacceptable
risk on the lawyer's independent judgment on behalf of the client and create an improper
adverse relationship between the client/borrower and lawyer/lender, which may not be
cured by the client's consent. LE Op. 1390.
In the facts you present under hypothetical #1, the opposing party wishes to purchase
Client's share of the equity in the marital home, and Client wishes that to happen.
However, it is not clear whether Client and opposing party have reached agreement as to
the value of, or their respective interests in, the marital property. Therefore, unresolved
issues exist relative to the marital property which may be the subject matter of litigation.
Therefore, the committee believes that it would be improper, under DR:5-103(A) and
DR:5-104(A), for Attorney to have client execute an assignment of Client's share of the
proceeds from the sale of Client's interest in the marital home to opposing party. In
addition, the client's consent to such a transaction does not cure the conflict. Such
transactions between attorney and client are grounds for discipline. People v. Franco, 690
P.2d 230 (Colo. 1985) (violation of DR:5-103(A) where attorney, to secure payment of
fees, took deed of trust in marital home about to be sold under court order with proceeds
to be divided equally between husband and wife); In re May, 96 Idaho 858, 538 P.2d 787
(1975) (violations of DR:5-103 and DR:5-104 where attorney prepared and had client
execute assignment of interest in marital home to secure payment of fees in divorce
matter).
In the facts you present under hypothetical #2, the parties have executed a property
settlement agreement under which Client will receive all proceeds from the sale of the
marital home. However, a final decree of divorce has not been entered. Under this
scenario, one could assert that the marital home is no longer the subject matter of
litigation. Nevertheless, the committee believes that DR:5-103(A) and DR:5-104(A)
require that a final decree or order be entered, incorporating the property settlement
agreement, before the attorney may acquire any interest in the marital property or
proceeds from the sale of such property. This is particularly important in divorce cases
where issues involving marital property can be so volatile and personal that matters
stipulated by the parties one day may become contested on the next. Maine Ethics
Opinion 117 (June 7, 1991) (lawyer may acquire mortgage on client's home to secure
attorney's fees provided divorce judgment is final and all residual disputes regarding
marital property are concluded); Massachusetts Bar Assoc. Opinion 91-1 (June 7, 1991)
(if the divorce proceeding is complete, lawyer may take assignment of interest in marital
property as security for payment for services rendered, provided client consents after full

Committee Opinion
September 21, 1995
and adequate disclosure, transaction is reasonable, and consideration is given to client's
sophistication, ability to pay and other methods of fee payment).
In summary, as a means to secure payment of legal fees in a divorce matter, an attorney
may not enter into an arrangement with a client wherein the attorney acquires an interest
in the marital property, or proceeds from the sale thereof, unless a final order or decree
has been entered, conclusively adjudicating all issues with respect to the use, possession,
division and sale of such property. In addition, the attorney may not enter into such an
arrangement unless the following requirements are met:
1. The client consents after full and adequate disclosure to the client of the
consequences of entering into such an arrangement;
2. The transaction is fair and reasonable, giving consideration to the client's
sophistication, ability to pay, and feasibility of other methods of fee payment; and
3. The client is advised that he or she may seek independent counsel to review the
transaction and is afforded an opportunity to do so, if the client so elects.
This opinion is advisory only, based only on the facts you presented and not binding on
any court or tribunal.
Committee Opinion
September 21, 1995
Legal Ethics Committee Notes. – Under Rule 1.8(a), a lawyer may not enter into a
“business transaction” with a client unless the client is given an opportunity to seek
independent advice, and there has been full disclosure and consent in writing.