Ethics Committee Formal Opinion #1992‑93/9

Client Funds and Property: Real Estate Settlement Accounts

June 24, 1993


An attorney must place funds received from a client or third party, in “clearly designated” trust accounts, separate from the attorney’s own funds or accounts. (Rule 1.15(a))

The term “funds” for purpose of attorney safeguarding under 1.15, includes money held by an attorney as escrow or settlement agent for real estate closings. (Rule 1.15(a))

Stringent record keeping requirements specifically apply to an attorney handling client funds under Rule 1.15(a)(2) and NH Supreme Court Rule. While such rules do not specifically apply to third party funds, basic fiduciary law would indicate prudent adherence to such rules in all cases.

An attorney cannot withdraw and disburse funds from a real estate settlement account & deposit them in the law firm’s general operating account.  Excess funds collected must be promptly returned to the party entitled to receive them or handled in accordance with the law regarding lost property.

A real estate title company owned or controlled by an attorney performing services typically overseen by an attorney is not considered practicing law as determined by most states addressing the issue.  No decision has been reached on this issue by NH courts, but there is concern that the activities of such a title company may constitute, in part, the practice of law, & therefore would be subject to rules restricting the handling of funds. [This question was subsequently addressed In the Matter of Unnamed Attorney and Unnamed Title Co., 138 NH 729 (1994).]

Lawyers involved in ancillary businesses (such as the operation of a lawyer‑owned or controlled real estate title company) must consider many troublesome ethical dilemmas.  (Rule 1.4; Rule 1.5; Rule 1.6; Rule 1.7(b); Rule 1.8(a); Rule 2.1; Rule 5.1; Rule 5.2; Rule 5.4(a); Rule 5.4(b); Rule 5.5; Rule 7.1; Rule 7.2; Rule 7.3

It may well be improper for an attorney to refer clients to or represent as clients, persons who are doing business with a real estate title company owned by the lawyer, absent full disclosure & consent of the client. (Rule 1.8)


  1. May a lawyer withdraw undisbursed funds from a real estate settlement account and deposit them in the lawyer’s general account prior to disbursement for the purposes for which the funds were collected?
  2. If a lawyer conducts real estate closings through a title company, of which the attorney is an employee and sole stockholder, are the attorney or the title company subject to the same rules with respect to the handling of settlement accounts as an attorney who handles settlement accounts directly?

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