Can a lawyer close a real estate deal brokered by the firm that employs the lawyer's own secretary as a part-time broker?

Plain-English summary

The inquiry asked whether Attorney X may close a real property transaction brokered by a real estate firm that employs the attorney's secretary as a part-time real estate broker.

The opinion concluded that he may. It reasoned that the lawyer would be obliged to consider whether the exercise of his independent professional judgment on behalf of his clients, the lender and the broker, would be materially impaired by his desire to advance his secretary's interests or to encourage future referrals, citing Rule 5.1(b). If, on analysis, the lawyer's judgment might be so compromised, perhaps because the secretary is a valued friend who stands to gain a valuable commission on the transaction, the conflict would be disqualifying unless the lawyer reasonably believed his representation of his clients would not be adversely affected and both clients consented after full disclosure of all risks. The opinion added that it would be extremely improper for the attorney to attempt to encourage referrals from the real estate firm by offering financial incentives to his secretary, citing Rule 2.2(c).

Currency note

This opinion was issued in 1990, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The provisions it applies (Rules 5.1(b) and 2.2(c)) have since been renumbered and revised. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance.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 the lawyer close a deal brokered by the firm that employs his secretary?

A: Yes, subject to a conflict check. The opinion concluded the lawyer must consider whether his judgment for the lender and broker would be materially impaired by a desire to help the secretary or attract referrals, citing Rule 5.1(b).

Q: What if the lawyer's judgment might be compromised?

A: The opinion concluded the conflict would then be disqualifying unless the lawyer reasonably believed the representation would not be adversely affected and both clients consented after full disclosure.

Q: Can the lawyer pay the secretary to steer referrals from the real estate firm?

A: No. The opinion stated it would be extremely improper to offer the secretary financial incentives to encourage referrals, citing Rule 2.2(c).

Background and rules framework

The opinion applied North Carolina Rule 5.1(b), governing representation that may be materially limited by the lawyer's other interests (corresponding to Model Rule 1.7), and Rule 2.2(c), addressing giving value to encourage referrals of legal business (corresponding to Model Rule 7.2). The analysis turns on whether the lawyer's stake in his secretary's commission or in future referrals would impair his judgment for the actual clients.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 5.1(b) (representation materially limited by other interests; consent after disclosure)
• North Carolina Rule 2.2(c) (improper inducements for referrals)
• MR 1.7 (conflict of interest, current clients); MR 7.2 (giving value for recommending a lawyer's services)

See also

• NC Ethics Op. RPC 102: gifts to employees from a court reporting service
• NC Ethics Op. RPC 105: public defender serving on the school board

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-88/

Original opinion text

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

Inquiry:

May Attorney X close a real property transaction brokered by a real estate firm which employs the attorney's secretary as a part-time real estate broker?

Opinion:

Yes. In the situation described in the inquiry, the lawyer would be obliged to consider whether the exercise of his independent, professional judgment on behalf of his clients, the lender and the broker, would be "materially impaired" by his desire to advance his secretary's interests or his desire to encourage future referrals. Rule 5.1(b). If upon analysis it appears that the attorney's judgment might be so compromised, perhaps because the secretary is a valued friend who stands to gain a valuable commission upon the completion of the transaction, the conflict of interest would be disqualifying unless the lawyer reasonably believed that his representation of his clients would not be adversely affected and both clients consented to the lawyer's participation after a full disclosure of all risks involved.

It would, of course, be extremely improper for an attorney in this situation to attempt to encourage referrals from the real estate firm by offering financial incentives to his secretary. Rule 2.2(c).