Can a closing attorney represent a buyer when the seller or lender will pay the buyer's fees only if their own attorney is used?

Plain-English summary

The opinion addressed two related fact patterns. In Situation A, a seller of real estate agreed to pay the buyer's closing costs, including attorney's fees, but only if the buyer used the seller's attorney; the buyer did not want to use that attorney. Situation B was the same except a lender, rather than the seller, offered to pay the buyer's fees on the condition the lender's attorney was used. The questions asked whether the attorney had to ask the client (seller or lender) to drop the condition, whether the attorney could close if the buyer wanted a different lawyer, and whether the attorney could offer the seller or lender a discounted fee.

On the first questions, the committee framed the issue as what duty an attorney has to control a client's marketing strategies. It concluded that a seller or lender may have legitimate reasons to prefer a familiar attorney and may offer a cash incentive to induce the buyer to use that attorney; unless the incentive violates a law, the attorney is under no duty to ask the client to stop, provided the attorney has not paid for the referral through reduced fees or otherwise. Nothing in the facts prevented the buyer from choosing separate counsel. The committee noted the attorney must still comply with Rule 1.6 (confidentiality), Rule 1.7 (conflicts; consent of each client after full disclosure), and Rule 1.8(f) (disclosure of third-party payment), cross-referencing Opinions 97-01 and 94-08.

On whether the attorney could close, the committee concluded that Rules 1.7(a)(2), 1.7(b)(2), and 1.8(f)(1) require the client's consent after consultation; if the buyer refuses consent, the seller's or lender's attorney may not close on the buyer's behalf, though the attorney could still represent the seller or lender. On the discount question, the committee read Rule 7.2(c) (no giving anything of value for a recommendation) together with Rule 1.5(a) (fees must be reasonable): a lender's recommendation of an attorney whose normal fees the lender will pay does not per se violate 7.2(c), and passing along genuine economies of scale from handling multiple closings does not necessarily violate the rule, but fee discounts that exceed demonstrable economies of scale or fall outside the attorney's prior practice would likely violate it, depending on the facts.

Currency note

This opinion was issued in 2000, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. 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: Must a closing attorney ask a seller or lender to stop conditioning paid fees on using that attorney?

A: The committee concluded no, so long as the attorney has not paid for the referral through reduced fees or otherwise; the seller or lender may offer a lawful cash incentive, and the attorney has no duty to ask the client to drop it.

Q: Can the attorney close for a buyer who wants a different lawyer?

A: The committee concluded no: Rules 1.7(a)(2), 1.7(b)(2), and 1.8(f)(1) require the buyer's consent after consultation, and without it the seller's or lender's attorney may not close on the buyer's behalf.

Q: Can the attorney give the seller or lender a discounted fee?

A: The committee concluded a discount reflecting genuine economies of scale from multiple closings does not necessarily violate Rule 7.2(c), but discounts exceeding demonstrable economies of scale or outside the attorney's prior practice would likely violate it.

Background and rules framework

The opinion interpreted South Carolina RPC 1.5(a) (reasonable fees), 1.6 (confidentiality), 1.7 (conflicts of interest), 1.8(f) (third-party payment of fees), and 7.2(c) (giving value for recommendations), corresponding to the like-numbered Model Rules. The committee also cited Opinions 97-01 and 94-08 for the broader duties in seller/buyer/lender closings.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.5(a) / Model Rule 1.5: fees must be reasonable.
• South Carolina RPC 1.6 / Model Rule 1.6: confidentiality.
• South Carolina RPC 1.7 / Model Rule 1.7: conflicts of interest; client consent after consultation.
• South Carolina RPC 1.8(f) / Model Rule 1.8(f): payment of fees by a third party.
• South Carolina RPC 7.2(c) / Model Rule 7.2: giving anything of value for recommending the lawyer's services.

Other opinions cited:

• S.C. Bar Ethics Advisory Opinions 97-01 and 94-08: duties in real estate closings involving buyer, seller, and lender.

See also

• SC Bar Ethics Op. 00-03: Bank-Closed Mortgage and Unauthorized Practice
• SC Bar Ethics Op. 02-06: Lawyer-Owned Mortgage Broker

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-00-01/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 00-01

Situation A:
Seller of real estate agrees to pay Buyer's real estate closing costs, including attorney's fees, but only if Buyer uses Seller's attorney. Buyer does not want to use Seller's attorney.

Situation B:
Same as A, except Lender (as opposed to the Seller) agrees to pay Buyer's attorneys fees, but only if Buyer uses Lender's attorney. Buyer does not want to use Lender's attorney.

Questions:
1.Does Seller's attorney have an obligation to ask Seller not to insist that he (the attorney) be the Buyer's real estate closing attorney in exchange for Seller's agreement to pay Buyer's fees?
2.Does Lender's attorney have an obligation to ask Lender not to insist that he (the attorney) be the Buyer's real estate closing attorney in exchange for Lender's agreement to pay Buyer's fees?

3. May attorney close the real estate transaction if he has knowledge that the Buyer desires to use a different attorney?
4. May attorney offer Seller/Lender a discounted fee for attorney's services:
   (a) in exchange for Seller/Lender's requirement that attorney be used for all closings?
   (b) under any circumstance?

Summary:
Attorney, whether representing Seller or Lender, does not have an obligation to ask his client not to insist that he be the closing attorney for Buyer in exchange for Seller/Lender's agreement to pay Buyer's attorney's fees, provided that attorney has not paid for such referral in the form of reduced fees or otherwise. However, if Buyer does not accept representation by Attorney, Attorney may not close the transaction on behalf of Buyer.

Opinion
In regard to Questions 1 and 2, the real issue is what duty an attorney has to control the marketing strategies of a client. There are many legitimate reasons why a seller or lender might prefer to use an attorney with whom he is familiar to handle all aspects of a real estate closing. If the value of those reasons is sufficient to motivate the seller or lender to offer a cash incentive to the buyer to induce the buyer to use the seller or lender's attorney, unless such incentives are in violation of a law, the attorney is under no duty to ask that the seller or lender cease the inducement.

Nothing in either fact situation prevents Buyer from exercising his right to choose his own legal counsel. While having a Seller or Lender pay all or some of the closing costs (such as attorney's fees) is certainly an inducement to a Buyer to use the attorney recommended by the Seller or Lender, the decision is just one factor in a Buyer's decision to buy a particular piece of real estate at a stated price.

The attorney must still comply with Rule 1.6 which requires client confidentiality, Rule 1.7 which requires that the lawyer ascertain that the representation will not adversely affect the relationship with the other client and obtains the consent of each client after full disclosure, and Rule 1.8(f) which requires the disclosure of the fact that the lawyer's services are being paid by another party (although under this fact situation, it would seem that this fact would be obvious to the Buyer). For a broader discussion of the duties imposed on an attorney in the situations described above, see Ethics Advisory Opinion 97-01. For a general discussion of an attorney's ethical obligations when representing a Buyer, Seller, and Lender, see Ethics Advisory Opinion 94-08.

In regard to Question 3, under either fact situation, Rules 1.7(a)(2), 1.7(b)(2), and 1.8(f)(1) require that the client consent after consultation. If the Buyer refuses to give his consent, then Seller or Lender's attorney may not close the transaction on behalf of Buyer. It would be up to Buyer to choose his own attorney and pay the costs associated with the representation. Attorney could still represent Seller and/or Lender.

In regard to Question 4, Rule 7.2(c) provides that an attorney shall not give anything of value to a person for recommending the attorney's services. A Lender's recommendation of a particular attorney whose normal, customary, and reasonable fees Lender is willing to pay does not per se violate Rule 7.2(c). Fee discounts which exceed demonstrable economies of scale or fall outside an attorney's prior practice would likely violate this rule. The outcome would depend on the particular facts and circumstances of each case.

Rule 1.5(a) requires that an attorney's fee shall be reasonable in all cases. The factors to be considered in determining whether a fee charged by an attorney is reasonable does not preclude a fee which reflects certain economies of scale. Therefore, an attorney who represents a Lender in multiple closings may obtain special knowledge and experience which allows the attorney to handle a closing more efficiently. Passing along the benefit of this efficiency to a client in the form of a lower fee does not necessarily violate Rule 7.2.

The attorney should take every precaution that the fee charged in a situation where such fee is paid by a party who is recommending the attorney does not violate Rule 7.2(c).

Situation B: Same as A, except Lender (as opposed to the Seller) agrees to pay Buyer's attorneys fees, but only if Buyer uses Lender's attorney. Buyer does not want to use Lender's attorney.

Questions:
1.Does Seller's attorney have an obligation to ask Seller not to insist that he (the attorney) be the Buyer's real estate closing attorney in exchange for Seller's agreement to pay Buyer's fees?
2.Does Lender's attorney have an obligation to ask Lender not to insist that he (the attorney) be the Buyer's real estate closing attorney in exchange for Lender's agreement to pay Buyer's fees?

3. May attorney close the real estate transaction if he has knowledge that the Buyer desires to use a different attorney?
4. May attorney offer Seller/Lender a discounted fee for attorney's services:
   (a) in exchange for Seller/Lender's requirement that attorney be used for all closings?
   (b) under any circumstance?

Summary:
Attorney, whether representing Seller or Lender, does not have an obligation to ask his client not to insist that he be the closing attorney for Buyer in exchange for Seller/Lender's agreement to pay Buyer's attorney's fees, provided that attorney has not paid for such referral in the form of reduced fees or otherwise. However, if Buyer does not accept representation by Attorney, Attorney may not close the transaction on behalf of Buyer.

Opinion
In regard to Questions 1 and 2, the real issue is what duty an attorney has to control the marketing strategies of a client. There are many legitimate reasons why a seller or lender might prefer to use an attorney with whom he is familiar to handle all aspects of a real estate closing. If the value of those reasons is sufficient to motivate the seller or lender to offer a cash incentive to the buyer to induce the buyer to use the seller or lender's attorney, unless such incentives are in violation of a law, the attorney is under no duty to ask that the seller or lender cease the inducement.

Nothing in either fact situation prevents Buyer from exercising his right to choose his own legal counsel. While having a Seller or Lender pay all or some of the closing costs (such as attorney's fees) is certainly an inducement to a Buyer to use the attorney recommended by the Seller or Lender, the decision is just one factor in a Buyer's decision to buy a particular piece of real estate at a stated price.

The attorney must still comply with Rule 1.6 which requires client confidentiality, Rule 1.7 which requires that the lawyer ascertain that the representation will not adversely affect the relationship with the other client and obtains the consent of each client after full disclosure, and Rule 1.8(f) which requires the disclosure of the fact that the lawyer's services are being paid by another party (although under this fact situation, it would seem that this fact would be obvious to the Buyer). For a broader discussion of the duties imposed on an attorney in the situations described above, see Ethics Advisory Opinion 97-01. For a general discussion of an attorney's ethical obligations when representing a Buyer, Seller, and Lender, see Ethics Advisory Opinion 94-08.

In regard to Question 3, under either fact situation, Rules 1.7(a)(2), 1.7(b)(2), and 1.8(f)(1) require that the client consent after consultation. If the Buyer refuses to give his consent, then Seller or Lender's attorney may not close the transaction on behalf of Buyer. It would be up to Buyer to choose his own attorney and pay the costs associated with the representation. Attorney could still represent Seller and/or Lender.

In regard to Question 4, Rule 7.2(c) provides that an attorney shall not give anything of value to a person for recommending the attorney's services. A Lender's recommendation of a particular attorney whose normal, customary, and reasonable fees Lender is willing to pay does not per se violate Rule 7.2(c). Fee discounts which exceed demonstrable economies of scale or fall outside an attorney's prior practice would likely violate this rule. The outcome would depend on the particular facts and circumstances of each case.

Rule 1.5(a) requires that an attorney's fee shall be reasonable in all cases. The factors to be considered in determining whether a fee charged by an attorney is reasonable does not preclude a fee which reflects certain economies of scale. Therefore, an attorney who represents a Lender in multiple closings may obtain special knowledge and experience which allows the attorney to handle a closing more efficiently. Passing along the benefit of this efficiency to a client in the form of a lower fee does not necessarily violate Rule 7.2.

The attorney should take every precaution that the fee charged in a situation where such fee is paid by a party who is recommending the attorney does not violate Rule 7.2.