1974, March, Pg. 17. ETHCS.

3 Colo.Law. 17

Colorado Lawyer

1974.

1974, March, Pg. 17.

ETHCS

17Vol. 3, No. 5, Pg. 17ETHCSOpinions of the Ethics Committee of the Colorado Bar Association are published here for the information of the members of the Association. Formal opinions are given on matters of general and continuing interest to the Bar. Informal opinions are given in response to specific inquiry.Topic:Receipt of attorney's fees from lending institutions.Digest:An attorney may properly receive a fee from a lending institution for examining a mortgagee title commitment, even if he knows that the institution may pass the legal expense on to the borrower. However, to avoid any appearance of improper conduct by the lender's attorney, he should satisfy himself, in advance, that there has been disclosure to the loan applicant that he will be assessed for the lender's legal expenses incurred in connection with the proposed loan.

Facts

An attorney receives a fee from a lending institution for reviewing and advising on the adequacy of a mortgage title commitment obtained by the institutuion. The attorney knows that it is customary for the lender at the closing of a loan to assess the amount of its attorney fee as an item of costs against the borrower. Is the attorney's conduct unethical in this situation?

Opinion

The attorney's conduct is not unethical. His client is the lending institution, and he may properly receive a fee from it for his services. The fact that the lender may later obtain reimbursement of its legal expense from the borrower is a contractual matter between the lender and the borrower.

This question regarding ethics has arisen because many borrowers, being assessed for legal expense at the loan closing, have assumed that they were being compelled to pay for legal services which they had not engaged, and, in effect, that this constituted solicitation on behalf of an attorney by the lending institution. Some have also assumed that the attorney represented both the lender and the borrower, with an apparent conflict of interests. Of course, an attorney could not ethically participate in a course of conduct involving either solicitation or unauthorized conflict of interests. It is believed that the principal problem could be avoided if it were clearly explained to the borrower by the lender at the outset that any legal...