New York State Bar Association Clarifies Ethics on Real Estate Referrals from Broker/Associate Lawyers

The New York State Bar Association (NYSBA) recently issued an important ethics opinion concerning the intersection of legal and real estate services. Published on September 5, 2024, Ethics Opinion 1273 addresses whether a lawyer may accept real estate clients referred by an associate in their firm who is also a licensed real estate broker. This guidance is crucial for attorneys who operate in both legal and real estate fields, ensuring they navigate potential conflicts of interest properly.

Understanding the Opinion

Ethics Opinion 1273 offers a nuanced perspective on how legal professionals can handle referrals from associates who are also real estate brokers. Here’s a summary of the key points:

1. Referrals Permissible with Conditions: A lawyer may accept referrals of real estate matters from an associate who is also a real estate broker, provided that the following conditions are met:
   • The lawyer must not share legal fees or real estate commissions with the broker/associate.
   • The lawyer must obtain informed consent from the client, confirmed in writing.
2. Informed Consent: The opinion emphasizes the importance of obtaining informed consent from the client, as outlined in Rule 1.7(b) of the New York Rules of Professional Conduct. This means that clients need to be fully aware of the potential conflicts of interest and must consent to the representation with full knowledge of the situation.
3. Historical Context and Previous Opinions: The NYSBA’s guidance aligns with earlier opinions that caution against a lawyer serving dual roles in the same real estate transaction. For instance, prior opinions (such as N.Y. State 1043 and N.Y. State 1237) have consistently maintained that a conflict arises when a lawyer acts as both a lawyer and a broker in the same transaction, making such conflicts non-waivable due to the inherent risk to independent legal judgment.
4. Application to Current Scenario: In this specific case, the associate’s role as a real estate broker does not disqualify them from referring clients to the lawyer for legal representation, as long as the lawyer maintains clear boundaries:
   • The associate should not participate in the legal work related to their referrals.
   • The associate’s referrals should not constitute a significant portion of the lawyer’s practice revenue, thereby mitigating any potential impact on the lawyer’s independent judgment.

Practical Implications for Legal Practices

For law firms with associates who are also licensed real estate brokers, it is essential to:

• Clearly delineate the financial and professional boundaries between legal and real estate services.
• Ensure that all client interactions involving referrals are handled with transparency and documented consent.
• Regularly review and update firm policies to align with evolving ethical standards.

A link to the opinion can be found here: Ethics Opinion 1273: Referral of real estate matters to lawyer from real estate broker who is also employed by lawyer as an associate – New York State Bar Association (nysba.org)

Need Further Guidance?

If you are navigating complex ethical considerations related to real estate referrals or any other legal and professional matters, the experienced attorneys at Tesser, Ryan & Rochman, LLP are here to assist. Our team can provide tailored advice to help ensure your practice complies with the latest ethical standards. Contact us today at (212) 754-9000 for expert guidance and support.