WISCONSIN ETHICS OPINION E-97-1: CODE OF PROFESSIONAL RESPONSIBILITY

Facts: A title company offers closing services to residential real estate customers and advises sellers that it will obtain a deed and transfer return from a lawyer. The title company supplies a lawyer with the specific information necessary to effectuate the deed and transfer return. The lawyer prepares the deed and transfer return using only the information provided by the title company. These documents are returned to the title company before the closing. The lawyer never meets the buyer or seller and does not do a conflict of interest check. The billing for the lawyer's services is sent to the title company who then deducts the lawyer's fee from the seller's proceeds. The title company pays the lawyer.

Question: May a lawyer ethically limit the scope of a lawyer's representation in a residential real estate transaction to drafting a deed and transfer return?

Opinion: In Wisconsin, the Rules of Professional Responsibility endorse more than one approach to the subject of legal representation in residential real estate transactions. A lawyer may represent a single client or multiple parties in a transaction. Whether a particular model of representation is appropriate depends upon the complexity of the transaction and the needs of the parties. In a single-client model, a lawyer must be aware that the other parties may assume that he or she is acting on their behalf or is disinterested. To avoid this situation, the lawyer should be proactive and clearly inform all the parties about the type of representation the lawyer is rendering. If the lawyer is representing a party other than the title company, the lawyer must ensure that the lawyer's relationship with the title company does not interfere with the duties to the other client no matter who that is (buyer, seller, lender, etc.). Likewise, if the lawyer is representing a party other than the seller, the lawyer must be sure the fact that the seller is paying the lawyer's fees does not affect the lawyer's professional judgment or interfere with the attorney-client relationship. In addition, the client must consent to this type of situation.

In order to represent multiple clients in a transaction, a lawyer must satisfy three conditions. First, the lawyer must consult with each client, discussing the risks and advantages to this type of representation and obtain a written consent to the common representation from each client. Second, the lawyer must reasonably believe that this matter can be resolved without prejudice to any client and in the best interests of every client. Finally, the lawyer must reasonably believe that the common representation can be undertaken impartially and without affecting the lawyer's responsibilities to any of the clients. In most situations, the lawyer can satisfy these conditions and obtain client consent with a form letter. However, personal consultation may sometimes be necessary in order to fully inform the clients about the implications of common representation.

After consultation with the client, a lawyer can limit the scope of representation to the preparation of the deed and the transfer return. When this occurs, the lawyer's responsibility must be to make certain that the client understands and accepts this limited scope. As stated above, a form letter may be used to inform a client about the limited scope of representation; however, under certain circumstances, a personal consultation may be necessary.

It is the opinion of the Professional Ethics Committee that an attorney who limits participation in a real estate transaction to drafting deeds and transfer returns does not necessarily assist a title company in the unauthorized practice of law. Such a conclusion could be drawn only after identifying the specific activities of the title company before and during the closing, determining that the activities of the title company amount to the unauthorized practice of law, and reviewing the lawyer's involvement in the activities of the title company.

EDITOR'S NOTE: In 1995, Illinois published a similar opinion, ISBA Opinion 94-1, which discussed the role of the lawyer in real estate transactions. There are differences between the Illinois and Wisconsin opinions, but the heart of this ethical issue remains the same. The facts leading to the Illinois scenario involved a real estate broker, rather than a title insurance company, who requested that Lawyer A prepare a deed and transfer tax document for a closing. The broker provided the information necessary to prepare these documents. When purchaser's lawyer contacted Lawyer A, purchaser's lawyer was told that Lawyer A's clients only wanted him to prepare the documents, that Lawyer A could not discuss the transaction, and that any changes to the documents desired by the purchaser's attorney would have to be discussed at the closing (which Lawyer A would not be attending). The Illinois advisory committee opined that a lawyer aids in the unauthorized practice of law (and may violate rules pertaining to confidentiality, conflicts, and the duty to communicate with and explain matters to a client) by limiting the lawyer's role in a real estate transaction to drafting documents and by delegating to the real estate broker such duties as information gathering and dissemination, as well as problem resolution at the closing.

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