130 N.J.L.J. 115
January 13, 1992
Property Tax Appeal Consultants
The Committee has received a significant number of inquiries
and complaints regarding the solicitation of property tax appeals
by individuals or property tax consulting groups, processing of
those appeals by the individual or entity, and the subsequent
engagement of an attorney by them. The issue addressed here is
whether such a practice constitutes the unauthorized practice of
This opinion is based upon the assumed fact that homeowners are being solicited to enter a contingent fee arrangement with property tax consultants, who in turn, engage attorneys as needed for real estate assessment appeals made to the County Board of Taxation, at no additional cost to the client.
It is well established that an appearance before a Tax Board is quasi-judicial in nature, requiring the services of a lawyer and the rules of the board permit only members of the New Jersey Bar to prosecute an appeal before it in a representative capacity. Stack v. P.G. Garage, Inc., 7 N.J. 118, 121 (1951). RPC 5.5(b) provides that a lawyer shall not assist a person who is not a member of the bar in performance of an activity that constitutes the unauthorized practice of law. The New Jersey Supreme Court has explicitly held that where an individual, who is not an attorney, contracts to procure reduction in real estate taxes which necessitates appeal to a county tax board, that individual is illegally engaging in the unauthorized practice of law. Stack v. P.G. Garage, Inc., 7 N.J. at 121. Specifically, the Court articulated that "...[I]n agreeing to prosecute [an] appeal for the defendant, [the licensed realtor] was contracting to furnish legal services without being licensed to do so." Id. In N.J. State Bar Ass'n v. Northern N.J. Mortgage Associates, 22 N.J. 184 (1956), modified, 34 N.J. 301 (1961), the Supreme Court reiterated this proposition, specifying exactly what relationship between a corporation and its own attorneys constitutes the unauthorized practice of law. "Corporations may act for themselves through their own attorney-employees, but they cannot perform acts for others in this capacity which amounts to the practice of law." Id. An organization that solicits homeowners to initiate tax appeals and engages an attorney in conjunction with such appeals, is impermissibly practicing law.
Furthermore, RPC 5.4(a) expressly provides that a lawyer or law firm shall not share legal fees with a non-lawyer. It is the opinion of this Committee that the engagement of a lawyer by a tax consultant and the subsequent fee sharing between the two contravenes RPC 5.4(b). Under the proposed arrangement, an attorney would receive a percentage of the fee charged to the client, with the remainder attributable to the tax consulting group for its role in facilitating the arrangement. Such a division of fees creates the appearance of an attorney compensating the group for obtaining a client for the attorney and as such, is prohibited.
The general rule purports that the only situations in which a lawyer may properly permit a client to receive and retain fees paid by others on account of his legal services are when such payments are to reimburse the client in whole or in part for the client's legal expenses actually incurred in the specific matter for which they are paid. H. Drinker, Legal Ethics (1953). Furthermore, when a lawyer is employed by a layperson to perform legal services for the layperson's client, the charge by the lawyer must be fixed by the lawyer and paid by the client, with the layperson acting as the client's agent in employing the lawyer. Id. The tax consulting groups however, have no such payment arrangement whereby fees for the attorney they have engaged are segregated from the rest of the fee paid by the homeowner for the legal costs incurred pursuant to the tax appeal. Rather, the attorney would receive a portion of the fee the group received as compensation, as per its contingent fee arrangement with the homeowner. It is the view of this Committee that such an arrangement unequivocally contravenes both RPC 5.5(b) and 5.4(a).
Other jurisdictions have likewise concluded that an individual, association or corporation engaged in rendering legal service through the employment of qualified lawyers to perform services for others constitutes the unauthorized practice of law. See generally, Frazee v. Citizens Fidelity Bank & Trust Co., 393 S.W.2d 778 (Ky. Ct. Apps. 1965); Judd v. City Trust & Savings Bank, 133 Ohio St. 81, 12 N.E.2d 288 (Ohio 1937); Rhode Island Bar Ass'n v. Automobile Services Ass'n, 55 R.I. 122, 179 A 139, (RI 1935).
Accordingly, this Committee finds that the solicitation of tax appeals by individuals not licensed to practice law or tax consulting groups constitutes the unauthorized practice of law.