1.4 Who Is the “client”?

• Library: Real Estate Transactions in Virginia (Virginia CLE) (2019 Ed.)

1.4 WHO IS THE "CLIENT"?

1.401 In General. As incredible as it seems, some lawyers have expressed the view that whenever only one lawyer is involved in a real estate transaction, he or she represents "the title" or "the transaction." ²⁸ The failure of a lawyer to understand clearly who is and who is not the "client" is a prescription for disaster. Moreover, failure to timely disclaim an attorney-client relationship may be sufficient to establish it.

1.402 Implied Attorney-Client Relationships.In General. It is easy to unintentionally establish an implied attorney-client relationship. Whenever a non-lawyer reasonably infers that a lawyer is using legal knowledge or skill for the non-lawyer's benefit, an implied attorney-client relationship arises even in the absence of a fee agreement. ²⁹ Real estate transactions pose intrinsic risks of creating such relationships. Implied attorney-client relationships impose the same implied-by-law ³⁰ duties and warranties as do express relationships, exposing the lawyer to disciplinary penalties for breach of such duties, notwithstanding the lawyer's good faith belief that he or she did not establish an attorney-client relationship. ³¹ Lawyer Employed by a Developer-Seller. A lawyer who undertakes to handle settlements for a developer-seller pursuant to contracts under which the developer-seller furnishes (and pays for) all settlement costs also acquires an attorney-client relationship with, and the full range of duties to, the purchaser unless the lawyer timely and expressly informs the purchaser that he or she is serving only as the developer-seller's attorney. ³²

C. Lawyer Employed by a Lender. To avoid an implied attorney-client relationship with the borrower, a lawyer who intends to represent only the lender must make it clear to the borrower at the outset

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that he or she intends to represent only the lender and that the borrower is free to engage an attorney to represent only the borrower. ³³

D. Avoiding Implied Attorney-Client Relationships. To minimize the risks of unintentionally creating implied attorney-client relationships, a lawyer should furnish to each unrepresented person a written statement emphasizing each person's right to employ his or her own lawyer and identifying each person whom the lawyer does and does not ³⁴ consider to be the client. Thereafter, that statement should be reiterated whenever the lawyer furnishes to or prepares anything in writing for an unrepresented person. ³⁵

A lender, as a party to the financing...