NEW YORK STATE BAR ASSOCIATIONCommittee on
Opinion #467 - 04/28/1977
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.