Can a seller's or lender's attorney close title for a development home advertised with 'No Closing Fees' without telling the buyer to get independent counsel?

Plain-English summary

The Committee was asked whether an attorney for a seller or lender may appear at the closing of title where the buyer or borrower is told, by advertising or otherwise, that no charge for legal services will be made because of a "No Closing Fees" representation. The Committee concluded the attorney acts improperly.

It reasoned that the "No Closing Fees" advertisement may lead a buyer to believe he need not engage independent counsel, while in fact the developer or lender pays the attorney and that cost is presumably folded into the purchase price or mortgage cost. A clandestine conflict of interests exists when the seller's attorney prepares all legal instruments, certifies and closes title, without fully advising the purchaser of the relationship and that his interests might be better protected by independent counsel; that advice should be given far enough ahead of closing for the buyer to obtain counsel.

The Committee added that Canon 27 forbids soliciting employment by advertisement or touters, Canon 47 bars making possible the unauthorized practice of law by a lay agency, and Canon 35 forbids lay control or exploitation of a lawyer's services. It observed that a developer may be engaged in the unlawful practice of law when it engages an attorney whose loyalty is owed to the developer while the attorney performs services as the purchaser's agent, citing New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates.

Currency note

This opinion was issued in July 1963, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canons 27, 35, and 47 of the former Canons of Professional Ethics. Conflicts of interest, unauthorized practice, and advertising are now governed by RPC 1.7, RPC 5.5, and RPC 7.1. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could a seller's lawyer close a "No Closing Fees" home sale and also handle it for the buyer?

A: Not without full disclosure. The Committee found a clandestine conflict where the seller's lawyer closes title without advising the buyer of the relationship and the option of independent counsel.

Q: What disclosure did the opinion describe?

A: The Committee said the buyer should be advised, far enough ahead of closing to retain counsel, of the existing relationship and that his interests might be better protected by independent counsel.

Q: How did unauthorized practice enter the analysis?

A: The Committee reasoned a developer may be engaged in the unlawful practice of law when it employs an attorney loyal to the developer while that attorney acts as the purchaser's agent, citing New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates.

Background and rules framework

The opinion applied Canon 27 (advertising and solicitation), Canon 35 (lay intermediaries), and Canon 47 (aiding unauthorized practice) of the former Canons of Professional Ethics. Those concerns now appear in RPC 1.7 (conflict of interest), RPC 5.5 (unauthorized practice of law), and RPC 7.1 (communications concerning a lawyer's services).

Citations and references

Rules of Professional Conduct (as in effect at the time):

• Canon of Professional Ethics 27 (advertising and solicitation)
• Canon of Professional Ethics 35 (lay intermediaries)
• Canon of Professional Ethics 47 (aiding unauthorized practice of law)

Cases:

• New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates, 32 N.J. 430 (1960), modified 34 N.J. 301 (1961), unauthorized practice by a lay mortgage agency

Other opinions cited:

• ABA Committee on Professional Ethics and Grievances, Opinion 8 (1925)

See also

• NJ ACPE Op. 40: Conflict and Representation at Closing Fees
• NJ ACPE Op. 61: Unauthorized Practice in Title Closings
• NJ ACPE Op. 212: Dual Representation of Buyer and Seller

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp7-1.html

Original opinion text

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

86 N.J.L.J. 405
July 25, 1963

OPINION 7

Conflict of Interests
Unlawful Practice of Law
Closing Fees

Inquiry has been made whether it is improper for an attorney for a seller or lender to appear in the closing of titles where it is represented to a buyer or borrower, or he is led to believe by advertising in newspaper or television announcements, or otherwise, that no charge for legal services will be made to the buyer or borrower by the seller or lender by the statement "No Closing Fees."

The advertisement "No Closing Fees" may lead a buyer or borrower to believe that he need not engage independent counsel to represent and protect his interests. Presumably the developer or lender pays the attorney for the services rendered and this sum or its equivalent value is included in the purchase price of the acquired premises or added to the cost of obtaining the mortgage. We are of the opinion that a clandestine conflict of interests exists when an attorney employed by a seller prepares all legal instruments, certifies and closes title, without advising the purchaser fully of the relationship which exists, and that his interests might be better protected by his engagement of independent counsel. Such advice should be given sufficiently in advance of the closing to enable the purchaser to secure independent counsel should he desire to do so.

Canons of Professional Ethics, Canon 27 provides that it is unprofessional to solicit employment by advertisement or through touters.

Canon 47 prohibits an attorney from making possible the unauthorized practice of law by any lay agency. Thus, as was stated in A.B.A. Committee on Professional Ethics and Grievances, Opinion 8 (1925), it is improper for a lawyer to allow his services to be sold or dealt in by any layman or lay agency. But there is yet another reason why such a practice is abhorrent. The essential dignity of the profession forbids a lawyer to solicit business or exploit his professional services. It follows that he cannot properly enter into any relations with another to have done for him that which he cannot properly do for himself.

Canon 35 is also pertinent to the inquiry propounded. It states

The professional services of a lawyer should not be controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer. A lawyer's responsibilities and qualifications are individual. ... A lawyer's relation to his client should be personal, and the responsibility should be direct to the client.

The exploitation of an attorney's services by laymen should be discouraged. A developer may be engaged in the unlawful practice of law where he engages an attorney whose loyalty is owed to the developer while the attorney performs services as the agent of the purchaser. See New Jersey Bar Ass'n. v. Northern N.J. Mtge. Associates, 32 N.J. 430 (1960), modified 34 N.J. 301 (1961).

The inroads and encroachments upon the practice of law by laymen and the resultant creeping abuses should be stemmed. Trading in the services of lawyers detracts from the essential dignity of our profession and its commercialization is condemned.

While this opinion rests upon the assumption that the attorney has knowledge of all the facts, the Committee is mindful of the obligation of the attorney to inquire fully as to the terms of his employment. It is difficult for the Committee to imagine a situation where this assumption would not be true.

For the reasons set forth, the attorney appearing at the closing under the circumstances outlined in the inquiry, is acting improperly.