103 N.J.L.J. 109
February 8, 1979
Referral Fee From Realtor
An attorney has received an unsolicited offer from a real estate company which reads in part:
Our company has recently adopted a policy of paying a referral fee (5% of the gross sales commission) to attorneys for signed listings obtained by us as a result of their referrals.
He now inquires:
Is it ethical for an attorney to accept a referral fee
from a real estate sales agency for real estate listings
obtained by the agency as a result of the attorney's
We note that neither the unsolicited offer nor the inquiry indicates whether the party to be referred by the attorney is his client. We, therefore, assume the existence of an attorney-client relationship. The ethical consideration presented is essentially the same as the lawyer's receiving a commission or rebate from a title insurance company, a bonding company, a printer, a court reporter or any other person or organization to whom the lawyer refers client-oriented business. See In re Rockoff, 66 N.J. 394 (1976); our Opinion 12, 86 N.J.L.J. 621 (1963); ABA Comm. on Professional Ethics, Informal Decision C688 (1964).
Before a referral is made, there must be full disclosure of the proposed referral including the commission arrangement and the express consent of the client must be obtained. Furthermore, the client is entitled to the benefit of the commission by way of credit against the fee or refund as the case may be. Where there is no prior or assisting attorney-client relationship between the attorney and the party referred to the realtors, we direct the attention of the bar to In re Genser, 16 N.J. 600, 606 (1964), where our Supreme Court said:
If an attorney wishes to be a businessman as well as perform the precise functions of a lawyer, he must act in the transactions with the high standards of his profession and not with an 'arm's length' and lapsable attitude.
The fiduciary obligation of the lawyer applies to persons who, although not strictly clients, he has or should have reason to believe rely on him.
See also In re Carlsen, 17 N.J. 338 (1955).
In view of the "fiduciary obligation" imposed upon attorneys,
it is our opinion that DR 5-107(A)(2) is applicable to all aspects
of this inquiry. Thus, the requirement of full disclosure is
applicable even in the absence of an attorney-client relationship.
It would be improper for an attorney to represent any party (buyer,
seller, mortgagee) in a transaction where the attorney originated
the referral to the realtor. See our Opinion 312, 98 N.J.L.J. 646