Opinion 467NEW YORK STATE BAR ASSOCIATION Committee on Professional Ethics
Opinion #467 – 04/28/1977 (36-77)
adverse interests, real estate, recommendations, referrals
Topic: Recommendation of professional employment; independent professional judgment; real estate
Digest: Not per se improper for lawyer to accept repeated referrals from real estate broker
Code: Canon 5; EC 5-1, 5-21; DR 2-103(C) and (D), 5-107(B)
May a lawyer accept repeated referrals from a real estate broker?
The practice of real estate brokers in referring potential home buyers to local counsel has in recent years come under increasing attack. It has been suggested that a lawyer who accepts repeated referrals from a real estate broker may compromise the interests of his client in an effort to avoid upsetting a transaction which the referring broker would understandably want to have consummated. In this context, we are asked whether the Code of Professional Responsibility serves to prevent or inhibit a lawyer from accepting repeated referrals from a real estate broker.Canon 5 enjoins lawyers to “exercise independent professional judgment on behalf of a client.” EC 5-1 then explains:”The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free of compromising influences and loyalties. Neither his personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute his loyalty to his client.”Consistent with the foregoing principle, DR 5-107(B) provides:”A lawyer shall not permit a person who recommends, employs, or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services.In addition to the Code’s requirement that lawyers generally exercise independent professional judgment on behalf of their clients, the Code also serves to prevent lawyers from rewarding persons who may elect to refer business to them. See, EC 2-8, 2-15 and DR 2-103(C) and (D).A lawyer is subject to the same ethical considerations and disciplinary rules in his dealings with real estate brokers as he is with respect to all other persons who may recommend his services. See, NY. State 244 (1972) and N.H. Op. No. 6 (1956) indexed at 1579, 0. Maru, Digest of Bar Association Ethics Opinions (1970); cf., NY State 206 (1971), NY City 848 (1960), NY City 377 (1930), NY County 380 (1948), NY County 359 (1940) and N Y County 147 (1918).While the position of the lawyer who accepts repeated referrals may be somewhat more fraught with temptation to avoid the strictures of the Code than one who does not, we cannot say that this factor is sufficient to require the lawyer to decline representation of clients to whom he has been recommended by the broker. Whether the broker refers one or several clients, the temptation to please him in anticipation of referrals yet to come is substantially similar. The broker’s obvious financial stake in the transaction likewise does not provide sufficient justification to assume that the lawyer will prejudice the rights of his client and abjure his professional responsibilities. The financial interest of the broker in the character of the services rendered by the lawyer is of no greater consequence than that of other classes of persons from whom the Code permits lawyers to accept referrals. See, N.Y. State 242 (1972) and N.Y. State 371 (1974); also see, N. Y. City 731 (1949), N.Y. City 568 (1941), NY County 380, supra, and ABA 294 (1958); cf., N Y. City 577 (1941), ABA 245 (1942) and ABA Inf. 1194 (1971).Nevertheless, although the Code clearly does not require a lawyer to refuse such referrals, he should carefully examine his conduct and be especially wary of any influences which may serve to dilute his professional loyalty or independence. If a lawyer concludes that it is not in the best interests of his client to consummate the transaction for which he has been retained, he must have no hesitancy in advising his client to withdraw.