SC Lawyer, May 2004, #2. Ethics Watch May 2004 The conflicted real estate closing - practicing with eyes wide shut.

• Author: By John Freeman

South Carolina Lawyer

2004.

SC Lawyer, May 2004, #2.

Ethics Watch May 2004 The conflicted real estate closing - practicing with eyes wide shut

South Carolina LawyerMay 2004Ethics Watch May 2004 The conflicted real estate closing - practicing with eyes wide shutBy John FreemanA lawyer serving clients who have potentially conflicting interests is not necessarily acting unethically, but danger is never far away. Among the most common factual scenarios in law practice where conflicted representation is quite common is the residential real estate closing.

Unscientific sampling of lawyers whose practices emphasize real estate matters convinces me that somewhere around 10 percent of all residential real estate closings are beset with some sort of glitch or discord that takes special time and energy to straighten out. Often the problem(s) can be resolved quickly.

Unfortunately, some problems are harder, and sometimes the end result is a lawsuit. This is what happened some years ago in New Jersey when Elizabeth Greene sold her home to James and Joan Connolly. The problems boiled over into two legal proceedings, one between the buyer and seller, and the second involving discipline for the closing lawyer. The resulting ethics case, Matter of Lanza, 65 N.J. 347, 322 A.2d 445 (1974), presents an abject lesson on why conflicted real estate closings are dangerous.

The basic facts: Elizabeth Greene wanted to sell her house and consulted real estate lawyer, Guy Lanza. Subsequently, a real estate sales contract that evidently was prepared by Ms. Greene's real estate broker was executed by her and the buyers, James and Joan Connolly. Lanza played no role in negotiating the contract's terms, which called for a July 1971 closing date. The parties signed the contract in lawyer Lanza's office.

Prior to the signing, Lanza had agreed to represent the Connollys together with Ms. Greene. He claimed he told this to Ms. Greene; her testimony was that she was not aware he represented the Connollys in the transaction until she found out later from Mrs. Connolly. Re- marked the court, "In any event it is quite clear that respondent agreed to act for the purchasers before discussing the question of such additional representation with Ms. Greene." Id. at 347, 322 A.2d at 447.

Ethics lesson: If you're going to represent potentially conflicting parties...