Daily Development for Friday, February 23, 2006
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

ATTORNEY/.CLIENT; BROKERS:  Attorney who is licensed real estate broker can receive real estate commission in lieu of hourly fee for representing seller in real estate transaction.

Ops Cal Atty Gen 04-1201 (Nov. 21, 2005)

A partner in a law firm who holds a California real estate broker's license may represent the seller of real property in a transaction in which the seller agrees to pay the law firm a real estate brokerage commission in lieu of an hourly fee for legal services rendered in connection with the sales transaction, provided that no one in the firm who does not hold a real estate broker's license performs any act for which a license is required.

Reporter’s Comment:  : Just because a lawyer who also holds a broker's license can get paid for performing both types of activities does not mean that it is automatically a smart way to do business. Because real estate selling activities are so law-related, the State Bar has opined that an attorney must comply with the bar's ethical standards as well as with those imposed on real estate brokers. California State Bar Formal Opinion No. 82-69.

Brokers have disclosure obligations, especially in residential sales, that are often quite inconsistent with attorneys' duties to preserve client confidences. Worse, brokers may engage in dual agency, whereas an attorney who tries it could get thrown out of the profession. So, think twice before you burn this candle at both ends.

Editor’s Comment 1:   This is not only a California problem.  An attorney acting as an attorney universally has the ethical duties of an attorney.  Often it is very hard for an attorney functioning as a broker to prove that everyone dealing with him knew that he was not functioning as an attorney at that moment.  Even if one uses a different phone and different stationery, the fact is that the community, especially present and former clients,  may be accustomed to treating the attorney as an attorney and expecting him to behave accordingly. 

Duties of loyalty and confidentiality come into play in many contexts.  The expectations that parties have of lawyers are quite different than those that they have of brokers on these questions.  We’re not saying “better” or “worse,” but just different.  And, in fact, these days its more than expectations, since many states have statutes imposing on brokers disclosure responsibilities that are antithetical to the ethical responsibilities of lawyers.

Editor’s Comment 2: It’s not just a one way street, either.  People who become used to dealing with someone as a broker, and relying upon disclosures by that party consistent with brokerage responsibilities, may then get fooled if in a subsequent transaction the person whom they thought was a broker suddenly starts behaving like a lawyer.  Third parties may be entitled to rely upon the appearance that the party is a broker based upon past experiences with the party.  It only takes one phone call to gin up pretty big financial responsibility in all of this.

The Reporter for this item was Professor Roger Bernhardt of the Golden Gate Law School in San Francisco.

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