Can a Kentucky lawyer also run a real estate business alongside the practice of law?

Plain-English summary

An attorney asked whether he could engage in both the practice of law and the operation of a real estate business, and, if so, under what conditions. The committee, considering the question for the first time, held that the dual activity is generally permissible but hemmed it with substantial limitations.

The committee adopted the criteria of ABA Informal Opinion 775 (Feb. 15, 1965), under which a lawyer does not necessarily violate the Canons by a separate occupation if: (1) the business is not necessarily the practice of law when conducted by a lawyer; (2) it can be conducted consistently with the Canons; (3) it is not used, directly or indirectly, to advertise or solicit legal matters; (4) it will not "inevitably serve" as a feeder to his practice; and (5) it is not conducted in or from the law office (with a narrow exception where the volume of both is so small that separate quarters are not economically feasible, and even then nothing may indicate the lawyer engages in any activity except law). Applying these, the ABA committee had concluded a practicing attorney would not necessarily violate the Canons by also being a real estate broker, and the Kentucky committee agreed this correctly states the rule.

The committee subscribed to the opinion's limitations. If the real estate business advertises, it may not be conducted in or adjacent to the attorney's office, and it may not be conducted in the attorney's name, because that would violate the DR 2-101 advertising prohibition. Because real estate work is so closely related to the practice of law, it would be unethical to divide real estate commissions with a nonlawyer or to enter the real estate business with a nonlawyer, grounded in DR 3-102 (no dividing legal fees with a nonlawyer) and DR 3-103 (no lawyer-nonlawyer partnership where any activity is the practice of law). And an attorney may never act as the lawyer in a transaction he initiated as broker, since that uses the business as a feeder. The committee closed by agreeing with ABA Informal Opinion 775 that, given the constant scrutiny such an arrangement invites, few lawyers will expose themselves to the suspicions that will inevitably arise.

Currency note

This opinion was issued in 1973 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules, including the advertising rules (SCR 3.130 Rules 7.01 through 7.50). The lawyer-advertising bar that underlies several of the limitations here was later loosened by Bates v. State Bar of Arizona (1977) and subsequent decisions. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer also work as a real estate broker?

A: Yes, in general. The committee adopted ABA Informal Opinion 775's criteria and held a practicing attorney does not necessarily violate the rules by also operating a real estate business, subject to the listed limitations.

Q: Can the lawyer act as attorney on a deal he brought in as the broker?

A: No. The committee held an attorney may not, under any circumstances, act as attorney in a transaction he initiated as broker, because that uses the business as a feeder to his practice.

Q: Can the lawyer split real estate commissions with a nonlawyer partner?

A: No. Because the real estate business is so closely related to the practice of law, the committee held it would be unethical to divide commissions with, or enter the business with, a nonlawyer, citing DR 3-102 and DR 3-103.

Q: Can the real estate business advertise under the lawyer's name from the law office?

A: No. The committee held that if the business advertises, it may not be run in or adjacent to the law office or in the attorney's name, because that would violate the DR 2-101 advertising prohibition.

Background and rules framework

The opinion applied DR 2-101 (advertising), DR 3-102 (no dividing legal fees with a nonlawyer), and DR 3-103 (no lawyer-nonlawyer partnership involving the practice of law) of the Code of Professional Responsibility, building on ABA Informal Opinion 775's framework for separate businesses. The modern analogs are Model Rule 5.7 (responsibilities regarding law-related services) and Model Rule 5.4 (professional independence, including the bar on sharing fees with and partnering with nonlawyers).

Citations and references

Rules of Professional Conduct:

• DR 2-101, DR 3-102, DR 3-103 (Code of Professional Responsibility); modern analogs Model Rules 5.7 and 5.4

Other opinions cited:

• ABA Informal Opinion 775 (Feb. 15, 1965) (criteria for a lawyer engaging in a separate business; a lawyer may also be a real estate broker subject to limits)

See also

• KBA Ethics Op. E-123: Lawyer Part-Time Claims Adjusting
• KBA Ethics Op. E-111: Police Officer Practicing Law
• KBA Ethics Op. E-121: Certifying Lender-Drafted Documents

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-074.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-74
Issued: November 1973

This opinion was decided under the Code of Professional Responsibility, which was in effect from 1971 to 1990. Lawyers should consult the current version of the Rules of Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org), especially Rules 7.01-7.50 and the Attorneys' Advertising Commission Regulations, before relying on this opinion.

Question:

May an attorney engage in both the practice law and the operation of a real estate business?

Answer:

Yes.

References:

DR 2-101, DR 3-102, DR 3-103

OPINION

The Ethics Committee has received an inquiry from an attorney concerning the propriety of engaging in both the practice of law and the operation of a real estate business. Assuming such dual activity to be permissible, he also requests guidance from the Committee in defining those situations in which it may be undertaken.
This is a difficult question and one that has not previously been considered by the Committee. In general, it is not improper for an attorney to engage in a separate business or profession, provided that in doing so he does not violate the Canons of legal ethics. In making that determination, several criteria have been developed over the years. ABA Informal Opinion 775 (dated February 15, 1965) states that an attorney does not necessarily violate the Canons by engaging in a separate occupation (I) if the separate business is not necessarily the practice of law when conducted by a lawyer, (2) if it can be conducted in accordance with the Canons; (3) if it is not used or engaged in such a manner as directly or indirectly to advertise or solicit legal matters for the lawyer, (4) if it will not "inevitably serve" as a feeder to his practice; and (5) if it is not conducted in or from a lawyer's law office, except where the volume of the law practice and business is so small that separate quarters are not economically feasible and where, even in that situation, there is no indication on the office, letterhead or otherwise that the lawyer engages in any activity except the practice of law. Applying these criteria, the ABA Committee on Professional Ethics concluded that a practicing attorney would not necessarily violate the Canons if he also engaged in the business of a real estate broker.
After careful consideration we are persuaded that this correctly states the rule. At the same time, we recognize and fully subscribe to the numerous limitations expressed in that opinion. If the real estate business engages in advertising of any kind, it may not under any circumstances be conducted in or adjacent to the attorney's office. To do so would necessarily involve a direct violation of the prohibition in DR 2-101 against advertising. For the same reason, a real estate business may not be conducted in the attorney's name if it advertises and solicits real estate business. Moreover, Informal Opinion 775 observes that since the real estate business is so closely related to the practice of law, it would be unethical for a lawyer to divide real estate commissions earned as a result of his efforts with a non-lawyer or to engage in the real estate business with a non-lawyer. The basis for these conclusions is found in DR 3-102, which forbids the dividing of legal fees with a non-lawyer, and DR 3-103, which expressly prohibits formation of a partnership by a lawyer with a non-lawyer if any of the activities of the partnership consist of the practice of law. Finally, it is evident that an attorney may not, under any circumstances, act as attorney in connection with a transaction initiated by him as broker, since that would on its face involve use of the business as a feeder to his practice.
In reaching our conclusion, we are mindful of the many problems an attorney will encounter if he attempts to engage concurrently in both his profession and the real estate business. His conduct will be under constant scrutiny by lawyers and public alike, and he must be constantly prepared to defend his acts. Under such circumstances we agree with the observation in ABA Informal Opinion 775 that few lawyers will expose themselves to the suspicions that will inevitably arise.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.