May a lender require the borrower to pay the lender's lawyer in a loan transaction?
Apply this to your situation
This page answers the general question as of 1987. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.
Plain-English summary
A lender made it a condition of a loan commitment that the borrower pay the lender's lawyer's fee as a closing cost. The lender had clearly disclosed that its lawyer did not represent the borrower and that the borrower could hire a lawyer of the borrower's choice. The committee found no ethics issue in that fee arrangement.
The opinion distinguished the divided-loyalty issue raised when a lender requires the borrower's lawyer to represent the lender too. The lender's lawyer remained the lender's lawyer regardless of who paid. The committee added that the lender's lawyer remained subject to the fee limits in DR 2-106.
Currency note
This opinion was issued in 1987 under Vermont's former Code of Professional Responsibility. The Vermont Supreme Court's rules history states that the Rules of Professional Conduct applied to lawyer conduct after September 1, 1999. Later rule amendments or opinions may have changed the analysis. Treat this opinion as historical context and verify current rules before relying on it.
Common questions
Q: Did borrower payment make the lender's lawyer the borrower's lawyer?
A: No. On the disclosed facts, the committee said the lender's lawyer remained the lender's lawyer regardless of who paid the fee.
Q: What disclosure mattered to the committee?
A: The lender had clearly told the borrower that the lender's lawyer would not represent the borrower and that the borrower could retain separate counsel.
Q: Did the committee waive fee limits because the borrower paid?
A: No. It said the lender's lawyer remained bound by DR 2-106 regardless of who paid.
Background and rules framework
The opinion cited Vermont DR 2-106 on fees and distinguished Vermont Opinion 79-23 on lender and borrower representation. It agreed with ABA Informal Decision 837 that the lawyer's client does not change with the source of payment.
Citations and references
Rules of Professional Conduct:
- Vermont Code of Professional Responsibility DR 2-106
Other opinions cited:
- Vermont Opinion 79-23, lender and borrower representation
- ABA Committee on Ethics and Professional Responsibility Informal Decision 837, payment of the bank's lawyer
See also
Source
- Landing page: Vermont Bar Association multiple-clients opinions
- Original PDF: Advisory Opinion 87-01
- Vermont Supreme Court rules history, “These rules apply to lawyer conduct after September 1, 1999.”
What do the rules say today, for your facts?
This opinion is from 1987. Ezel checks the current Vermont Rules of Professional Conduct against your situation and cites the rules it relies on.
Opens in Ezel Pro.
- Checks the law as it stands today, not only this page
- Cites every source it relies on, so you can verify it
- Chat, drafting and research in one workspace