There is perhaps no other area of practice for attorneys more fraught with potential ethical hazards than residential real estate law. As of the date of this writing, a search of disciplinary cases against attorneys in South Carolina for the past decade mentioning “real estate” results in more than one hundred opinions. Some of these potential pitfalls involve multiple representation traps within the South Carolina Rules of Professional Conduct.
As Claire Manning, Esq. stated in her recent book for real estate attorneys, “[r]eal estate transactions are fraught with multiple representation traps. The Lawyer’s duties appear to run to everyone—the lender, the buyer, the seller, the title insurance company, the broker. The lawyer must determine who is to be represented and must consult with and obtain consents of each client.” Claire T. Manning, Handbook for South Carolina Dirt Lawyers, 176 (2d ed., South Carolina Bar Continuing Legal Education Division 2008). (However, since publication, in S.C. Bar Ethics Advisory Opinion 09-07, the question was posed to the Ethics Advisory Committee whether, in a “standard real estate closing where Borrower retains [the] Lawyer, should [the] Lawyer assume that [the] Lawyer is representing the Lender…” The committee answered in the negative “absent additional facts and circumstances.” According to the Committee, “the mere supplying of closing instructions by a Lender to Lawyer does not, in and of itself, create and attorney-client relationship” that would necessitate the requirements of Rule 1.7(a), SCRPC with regard to the lender.)
Rule 1.7 of the South Carolina Rules of Professional Conduct speaks to conflicts of interest in the representation of multiple current clients. The rule states:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
Note that the lawyer must determine who he or she represents and get their informed consent to the multiple representation in writing.
The South Carolina Supreme Court has held that preparation of a deed (for a nominal fee) for the seller, where no other attorney-client relationship exists, is not unethical. In re Anonymous Member of the South Carolina Bar, 298 S.C. 163, 378 S.E.2d 821 (1989). The South Carolina Bar Ethics Advisory Committee opined that an attorney may represent the buyer, seller and lender in a real estate closing provided that no negotiations are required, that there are not disputes regarding the closing and that all parties have been fully informed.
With regards to the title insurance company, two relevant ethics advisory opinions have been issued: Ethics Advisory Opinion 82-02 states that a closing attorney may be an issuing agent for a title insurance company at a closing after full disclosure, and S.C. Bar Ethics Advisory Opinion 89-17 approved the closing attorney-title agent function, along with owning a separate title abstract company. In this opinion, however, lawyers are warned to comply with South Carolina Department of Insurance Regulation 69-18. South Carolina Department of Insurance Form 2718 has been developed to meet the required disclosures of Regulation 69-18.