Rutgers School of Law, OAL case ACPE013

87 N.J.L.J. 1
January 2, 1964

ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

Appointed by the New Jersey Supreme Court

OPINION 13

Unlawful Practice
Advertising
Conflict of Interest
Closing Fees

    A member of the bar has requested our opinion on the propriety of attorneys acting under a printed "Real Estate Sales Agreement"
in the sale of one unit of a housing development. The particular agreement presented provides, inter alia, that the seller agrees to obtain a first mortgage under certain not unusual terms for the buyer within a prescribed time limit; that "all charges for examination of title, mortgage closing, survey, recording fees, application and appraisal charges in the amount of $350 [figures typed in contract] will be paid by Buyer at the time of closing;" and that "Closing of title is to take place ... at the office of" X and Y (names and address of attorneys printed in form) on or about date typed in form.
    The agreement does not set forth all the facts and circumstances under which the attorneys render their services. Rather, it presents a number of variations found in such agreements.
    The inquiry specifically presented raises a number of questions. This was indicated in the responses of a number of lawyers to this Committee's request through the New Jersey Law Journal for the bar's opinion on the general problem of dual representation at closings of title to development homes earlier this year.
    The questions raised are:
    1. Is it improper for an attorney to permit an intermediary, whether a builder-owner or a lender, to fix his fees for closing title?
    (It is noted that in the above-cited specific agreement it is not clear from the language relating to fees whether the seller, lender or attorney fixed the amount.)
    2. Are Canons of Professional Ethics, Canons 27 and 35, proscribing advertising and use of intermediaries by lawyers, violated by the attorneys who permit their names and addresses to appear on the printed forms as the place where closings of title are to take place?
    3. Is Canons of Professional Ethics, Canon 6, proscribing representation involving conflicts of interest, violated by an attorney permitting his name and address to be used in a printed form of contract as the place of closing in a way that implies, or would lead a buyer to believe, that said attorney will represent all parties, including the purchaser, and that the purchaser need not and, indeed, may not, bring an attorney of his own choice to protect his interest at the closing?
    (It should be noted in the cited language of the specific agreement presented to the Committee that there is no language expressly prohibiting the purchaser from bringing his own attorney to the closing.)
    4. Assuming that the buyer wants to pay all cash at the closing and prefers to rely upon his own attorney's title opinion, is it proper for an attorney to accept the payment of $350 as provided in the contract in question?
    In answering the foregoing questions we are mindful that we are concerned here only with the conduct of the attorneys involved. It is not within our sphere to pass on the substantive aspects of the agreement or the relevant bargaining positions of the parties or the wisdom of home buyers consulting their own attorneys before they sign real estate purchase agreements.
    Most, if not all, of the questions raised herein would be obviated if the language of agreements for the sale of homes in development tracts were clear, and unambiguously and forthrightly advised the purchaser as to the precise nature of the representation of the attorneys named in the agreement - that they
represented the seller only, or the lender, or both, as the case may be - but that they will not represent the buyer and that the buyer is expressly advised to have his own attorney to protect his interests.
    For the most part, the basic general questions raised in the present inquiry have been disposed of by our Supreme Court in In re
Kamp, 40 N.J. 588 (1963).
    However, we will answer the specific questions raised in the inquiry before us as follows:

    1. Assuming the $350 fee was not fixed by the attorneys, there is an impropriety on the part of the attorneys in permitting others to fix their fee for the reasons set forth in our Opinion 7, 86 N.J.L.J. 405 (1963).
    2. Attorneys who prepare printed forms of real estate agreements including their names and addresses and distribute them or permit them to be prepared and indiscriminately distributed among real estate brokers for their general use are in violation of Canons 27 (proscriptions against solicitation and advertising by lawyers) and 35 (against lay intermediaries). However, where one attorney or firm of attorneys represents a developer of a large tract on which there is or will be a sufficiently large number of homes for sale, the use of printed forms with the names and address of the attorneys who are to close title for the builder and lender does not violate Canon 27.
    3. Any real estate agreement which directly or indirectly, or due to ambiguity of its terms, encourages by implication, or otherwise induces, a purchaser not to seek advice of counsel other
than the seller's or lender's attorney is reprehensible and places any attorney named, with his knowledge, in such an agreement subject to the prohibitions of the Canons of Professional Ethics for the reasons given in In re Kamp and our Opinion 7, supra.
    4. The question as to the justification of a closing charge where the buyer wants to pay all cash at the closing and wishes to rely only on his own attorney's opinion as to title involves terms of a contract. The basic terms of a real estate contract which are subject to negotiation between the parties and the relative bargaining positions of a buyer and seller are not within our province except to the extent that the contract purports to fix fees to be paid to an attorney. Obviously if the attorney has not rendered the services set forth in the contract he cannot properly accept such fees.

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