Ethics Opinon 1969-2

SUBJECT: LAWYER CONDUCTING REAL ESTATE BUSINESS

I
QUESTION PRESENTED

May a lawyer who has transferred his real estate broker's license to his son's construction business continue to supervise all real estate transactions and do direct soliciting in the nature of contacting investors for small scale land developments?

Would it be appropriate for the company to become a member of the real estate broker's association in view of the fact that the attorney would be representing the company as its broker?

II
SUMMARY

Although it is possible that a lawyer may properly conduct an independent real estate business and/or be involved or connected with a real estate business, he must take great care to insulate himself as a lawyer in those activities involving the law as opposed to his conduct in actively engaging in the real estate business. It is the Committee's opinion that the guidelines set forth relative to the separation of himself as a lawyer from that of a businessman must be strictly adhered to, and he must in all respects conduct himself in the practice of the law entirely distinct from any other unrelated business.

III
STATUTES AND CANONS

The Los Angeles County Bar Association Committee on Professional Ethics has held in its Informal Opinion No. 1967-2 that:

"It is improper for a lawyer to engage in the practice of law and at the same time conduct a real estate brokerage business."

The American Bar Association has taken the position that such an endeavor on the part of a lawyer depends upon the surrounding circumstances. They point out that in small communities where everyone knows what everyone else is doing, and where there is comparatively little remunerative law practice, it is quite the usual thing for lawyers to engage in collateral occupations such as licensed broker or insurance agent. They do, however, insist that a part of the surrounding circumstances is that the two occupations be conducted absolutely independent of one another. There should be, for example, distinct letterheads so that one occupation, to wit, the real estate business, cannot be used as a means of solicitation or in order that the lawyer might secure additional employment. They further hold that a lawyer might properly conduct an independent real estate business in another county. (EDITOR'S NOTE: No citation was given for this opinion of ABA.)

The difficulty comes when the second occupation, particularly when it involves the real estate business, though it is professionally distinct is one so closely related to the practice of the law that it involves the solution of what are essentially legal problems. In conducting the business the lawyer will inevitably be confronted with situations where if not technically at least in substance he will violate the spirit of the Canons of Legal Ethics, particularly as they pertain to advertising and solicitation.

There is presented the additional problem of a division of fees. Canon 34 states:

"No division of fees for legal services is proper, except with another lawyer, based upon a division of service or responsibility."

IV
ANALYSIS

Although there is nothing in the Canons to prevent a practicing lawyer from carrying on another business, either from his law office or elsewhere, opinions have held that such business must be an occupation entirely distinct from and unrelated to his law practice.

It has been said that:

"No one would dispute the right of a lawyer to be a teacher, or a violinist, doctor or a farmer, or to sell rare postage stamps, provided he in no way used such occupation to advertise or as a feeder to his law practice."

Great care must be taken in a business such as the real estate business where an inconsistency might arise when the business is one that will readily lend itself as a means for procuring professional employment by the lawyer. In such an instance, the business could be used as a cloak for indirect solicitation. To avoid such inconsistencies arising during the individual's active participation in the business venture such as the real estate business, it is necessary that the lawyer keep the business in which he is engaged, entirely separate and apart from his practice of the law, and he must, in any event, conduct it with due observance of the standards of conduct required of him as a lawyer. In any event, each case should be judged on its own particular facts. The lawyer may not, by engaging in a separate business, advertise his law practice or use the business as a feeder, and great care must be taken to avoid any such type of impropriety.

The possibility of division of fees cannot be ignored for although the lawyer acting in his capacity as a real estate businessman is conducting a business separate and apart from that of being an attorney, nevertheless, if there should arise a legal question which he resolves when acting as an attorney and which profits him as an attorney, he cannot share that remuneration with a lay member of the company conducting the business involved. His plight may well be one of wearing two hats.

Thus, where an attorney entered into an arrangement with a layman to carry on a real estate business from the same offices from which he conducted his general practice of the law and conducted that business (real estate business) under his name and that of the layman and affixed a sign to the front of his office and inserted an advertisement in the local newspaper giving the name of the real estate firm and the address of the office in which he engaged in the practice of the law, it was held that the conduct of a real estate business by a lawyer under these circumstances would be unethical. (See Informal Opinion No. 860, American Bar Association, Standing Committee on Professional Ethics).

The attorney must, therefore, take great care to separate his legal activities from his real estate business.

This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.

EDITOR'S NOTE: The Committee reviewed this opinion on October 22, 1976, and found that it reflects the present status of the law in this area. The subject matter of A.B.A. Canon 34 is now found in DR 2-107 of the A.B.A. Code of Professional Responsibility.

(The second question was not answered in this opinion.)

Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.