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...