Ethics Committee Advisory Opinion #1988/9-9
Fees: Arrangement Which Effectively Passes Costs on to a Third Party
December 8, 1988
ANNOTATIONS:
A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee, based on various factors including the amount involved and the results obtained, and the nature and length of the professional relationship with the client. (Rules 1.5; 1.5(a)(4); 1.5(a)(6))
The fee agreement is a matter for negotiation between the lawyer and the client, and there is no basis for disturbing that agreement unless the fee is illegal or clearly excessive. (Rule 1.5)
QUESTION:
The inquiring attorney represents mortgage company clients, and handles foreclosure proceedings for these clients. Occasionally, the mortgage being foreclosed is insured by the U.S. government. In such foreclosures, the foreclosing mortgage company may purchase the property itself at the foreclosure, and then convey the property to the insuring agency of the federal government. Under such circumstances, the government limits the amount of foreclosure costs for which it will reimburse the mortgage company. The inquiring attorney suggests that the schedule of foreclosure costs allowed by the governmental agencies is unrealistic, thus requiring the mortgage company to absorb several hundred dollars in legal expenses for each such foreclosure.
The inquiring attorney would like to be able to handle foreclosures which go to sale and involve property subsequently conveyed to the government agency at a reduced rate. This would benefit his mortgage company clients. In other cases (i.e. where the foreclosed property is purchased by the debtor or a third party), the inquiring attorney proposes to charge his standard rate. His question is whether such a “dual rate” arrangement violates the Rules of Professional Conduct.