111620 NYEO, ETH 1208

Case DateNovember 16, 2020
CourtNew York
ETH 1208
Ethics Opinions 1208
New York Ethics Opinion
November 16, 2020
         Topic: Solicitation and Referral of Real Estate Matters by Real Estate Broker Employed by Lawyer as Paralegal          Digest: A lawyer who has no financial interest in the commission generated by a real estate transaction may accept referrals for real estate closings from her paralegal who is also a real estate broker, provided such referrals will not present a significant risk that the lawyer’s professional judgment on behalf of the client will be adversely affected by the lawyer’s own financial, business, property or other personal interests. However, if a significant risk exists, then the lawyer may accept the referral only if the lawyer satisfies the exceptions set forth in Rule 1.7(b), including informed client consent. The lawyer must also ensure that the paralegal’s conduct complies with Rule 7.3 governing attorney solicitation whenever the paralegal recommends or refers a client to the lawyer.          Rules: 17(a)(2); 17(b); 5.3(a); 5.4(c); 7.3(a) (1); 7.3(b); 8.4(a)          FACTS          1. The inquirer is a transactional real estate attorney. She employs a paralegal who is also a real estate broker. The paralegal wants to refer his real estate clients to his attorney/employer to represent them in real estate closings. As a real estate broker, the paralegal will earn a percentage of the sale price only if the transaction closes. The attorney has no financial interest in the commission that the paralegal/broker will receive. Rather, the attorney will charge a legal fee to the real estate client on the same basis that she bills other real estate transaction clients. The paralegal will not assist his employer in those closings and will not provide any paralegal services relating to real estate transactions that he has referred.          QUESTIONS          2. May a lawyer who has no financial interest in the closing of a real estate transaction accept a referral of a real estate closing from the lawyer’s paralegal, who is also a real estate broker, where the paralegal will earn a brokerage commission upon the closing of the transaction but will not provide any legal services relative to that transaction?          3. Would the paralegal’s referral or recommendation of real estate clients to the lawyer constitute improper solicitation?          OPINION          Independent professional judgment: Rules 1.7 and 5.4          4. Rule 1.7(a)(2) of the New York Rules of Professional Conduct (the “Rules”) provides that a lawyer may not represent a client if a reasonable lawyer would conclude that “there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.”          5. In NY. State 1043 (2015), we noted that “we have long and...

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