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                                         89 N.J.L.J. 696
                                        October 27, 1966


ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

Appointed by the New Jersey Supreme Court

OPINION 100

Real Estate Transactions

    We have been asked if an attorney can ethically represent both
parties in the following transactions:

    A.    An attorney represents the seller of real estate. The purchaser or his agent requests the same attorney to represent the purchaser also in the same matter.

    B.    An attorney represents the purchaser of real estate. The seller or his agent requests the attorney to represent the seller also in the same matter.

    C.    An attorney represents the seller of real estate. Can he represent the mortgagee making the mortgage loan to the purchaser (representing part of the purchase price of the real estate)?

    D.    An attorney represents the purchaser of real estate. Can he represent the mortgagee making the mortgage loan to the purchaser (representing part of the purchase price of the real estate)?

    E.    An attorney represents the builder of real estate. Can he represent the mortgagee making the mortgage loan to the purchaser (representing part of the purchase price of the real estate)?

    F.    An attorney represents a purchaser of real estate. He draws a contract for the sale of the real estate on behalf of the purchaser. Thereupon, the sellers (or the broker representing the sellers) requests this office to draw a deed and affidavit of title in connection with said sale. May we draw this deed and affidavit of title for the sellers without representing them and without charge to them?


    All of the foregoing questions have been previously answered in the affirmative providing express consent to the dual representation is given by all parties concerned after full disclosure of the facts. See In re Ramp, 40 N.J. 588 (1963), and N.J. Advisory Committee on Professional Ethics, Opinion 51, 87 N.J.L.J. 705 (1964).
    The guidelines in such transactions have been clearly plotted but the posing of these questions seems to indicate that the clarity discerned by us, is not shared by some members of the bar.
It might be well, therefore, to reiterate what we thought was free of doubt.
    The dual representation, obvious in each of the questions, presents a conflict of interest proscribed by the Canons of Professional Ethics, Canon 6, in these words, "It is unprofessional
to represent conflicting interests .... ." This conflict was expressed in In re Kamp, supra, as follows:
            A conflict of interest is inherent in the relationship of buyer and seller; and Canon 6 is applicable to every occasion in which an attorney undertakes to represent both the seller and the buyer under a sales contract.

    And a conflict is also present if an attorney undertakes to represent a seller and mortgagee, a purchaser and mortgagee, or a builder and mortgagee. The exception that permits an attorney to represent both parties, in the business relations here under discussion, is the "express consent of all concerned given after a full disclosure of the facts" exacted by Canon 6. In this connection, Justice Proctor said in the case of In re Kamp, supra:
        ...Full disclosure requires the attorney not only to inform the prospective client of the attorney's relationship to the seller, but also to explain in detail the pitfalls that may arise in the course of the transaction which would make it desirable that the buyer have independent counsel. The full significance of the representation of conflicting interests should be disclosed to the client so that he may make an intelligent decision before giving his consent. If the attorney cannot properly represent the buyer in all aspects of the transaction because of his relationship to the seller, full disclosure requires that he inform the buyer of the limited scope of his intended representation of the buyer's interests and point out the advantages of the buyer's retaining independent counsel. A similar situation may occur, for example, when the buyer of real estate utilizes the services of the attorney who represents a party financing the transaction. To the extent that both parties seek a marketable title, there would appear to be no conflict between their interests. Nevertheless, a possible conflict may arise concerning the terms of the financing, and therefore at the time of the retainer the attorney should make clear to the buyer the potential area of conflict. In addition, if the buyer's interests are protected only to the extent that they coincide with those of the party financing the transaction, the attorney should explain the limited scope of this protection so that the buyer may act intelligently with full knowledge of the facts.

    In our Opinion 51, supra, we emphasized the importance and necessity of full disclosure before accepting dual representation, indicating that an attorney must make his determination to accept or reject based on the facts and circumstances peculiar to each case. We said:

        ...Again, we believe the situation here to be significantly different from the case where an attorney represents both the purchaser of a home and the local lending institution that supplies the mortgage funds. That is a very common practice and in general quite unobjectionable. In the case we are considering, however, the desire to continue to represent the lender as more homes are sold in the future will naturally abate the ardor with which the attorney will strive to secure the best terms for the purchaser. The wish to maintain existing relationships both with the seller and the lender will cause the attorney to shy away from the alternative of seeking to induce all parties to permit the financing to be placed elsewhere upon more favorable terms, should this be possible. Only after a very full disclosure to the client of these possibly disabling factors should an attorney already representing the lender, under circumstances such as these, agree to accept a retainer from the buyer.

    It seems appropriate to observe, at this point, that the foregoing has no application to transactions where one of the parties is a public agency. In such circumstances the public interest is involved and an attorney may not represent conflicting interests even with the consent of all concerned after full disclosure. Drinker, Legal Ethics 120 (1963); Chief Justice Weintraub in "Notice to the Bar," 86 N.J.L.J. 713 (1963); Ahto v. Weaver, 39 N.J. 418, 431 (1963); N.J. Advisory Committee on Professional Ethics, Opinion 4, 86 N.J.L.J. 357, 361 (1963); Opinion 29, 87 N.J.L.J. 106 (1964); Opinion 54, 87 N.J.L.J. 689 (1964); Opinion 65, 87 N.J.L.J. 810 (1964); Opinion 67, 88 N.J.L.J. 81 (1965); and Opinion 69, 88 N.J.L.J. 97 (1965).

    In conclusion we wish to again emphasize the importance of full disclosure, as explained above, followed by express consent of a11 concerned before a lawyer should accept the representation of conflicting interests.

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