Can a lawyer take a deed of trust and promissory note from a client to secure fees for future legal work?

Plain-English summary

A law firm received a deed of trust and promissory note to secure legal fees for future representation; the deed of trust was in foreclosure and the grantor had declared bankruptcy. The committee was of the opinion that if the assignment of the promissory note and deed of trust gave the lawyer solely a security interest in the property, rather than a proprietary interest, there would be no conflict with RPC 1.8(j).

The committee added that if the lawyer did acquire a proprietary interest in the property by the assignment, it would appear to violate that rule. If the interest was a security interest, the committee was of the opinion that the lawyer then had to comply with the requirements of RPC 1.8(a).

Currency note

This opinion was issued in 1986, before the 2006 revisions to the Washington Rules of Professional Conduct. The conflict-of-interest provisions in RPC 1.8, including the business-transaction requirements and the prohibition on acquiring a proprietary interest, were later renumbered and amended. Treat this page as historical context, not current guidance.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 lawyer take a deed of trust from a client to secure future fees?

A: Per the opinion, yes, if the assignment conveys only a security interest rather than a proprietary interest, in which case the committee found no conflict with RPC 1.8(j).

Q: What turns the arrangement into a rule violation?

A: The committee was of the opinion that if the lawyer acquired a proprietary interest in the property through the assignment, it would appear to violate RPC 1.8(j).

Q: Does taking a security interest end the analysis?

A: No. The committee was of the opinion that if the interest was a security interest, the lawyer then had to comply with the requirements of RPC 1.8(a).

Background and rules framework

The opinion applies Washington RPC 1.8(a), the rule on business transactions with a client (corresponding to Model Rule 1.8(a)), and RPC 1.8(j), which the opinion treated as prohibiting a lawyer from acquiring a proprietary interest (the proprietary-interest prohibition corresponds to Model Rule 1.8(i)). The committee distinguished a security interest in the property, which secures payment, from a proprietary interest in the property, which it treated as a conflict.

Citations and references

Rules of Professional Conduct:

• Washington RPC 1.8(a) (business transactions with a client), corresponding to Model Rule 1.8(a).
• Washington RPC 1.8(j) (acquiring a proprietary interest), corresponding to Model Rule 1.8(i).

See also

• WSBA Ethics Op. 926: a lawyer serving as trustee on a client's deed of trust
• WSBA Ethics Op. 1017: a lawyer who is also a real estate broker and the fee agreement

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=155

Original opinion text

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

Advisory Opinion: 1044
Year Issued: 1986
RPC(s): RPC 1.8(a); 1.8(j)
Subject: Conflict of interest; receipt of deed of trust to secure future fees

The Committee was of the opinion that if the assignment of the promissory note and deed of trust gave you solely a security interest in the property, rather than a proprietary interest, there would be no conflict with RPC 1.8(j). However, if you did acquire a proprietary interest in the property by the assignment, it would appear to violate that rule. The Committee was further of the opinion that, if it were a security interest, you must then comply with the requirements of RPC 1.8(a).