OPINION 377
November 1974

Summary

An exclusive lease for law practice in a building owned, operated, and occupied by a lending institution based on the percentage of gross or net income of the attorney would be in violation of Disciplinary Rule 3-102.

Facts

An attorney is offered the opportunity to rent a space in a building owned and operated by a lending institution which does not rent space to the public, generally, and the space rented would be the only space rented in the building to any person for the purpose of conducting a law practice. The lease would provide for a base rental and an additional rental based upon and measured by a percentage of the gross fees collected from the total practice of from some sections of the practice, or by a percentage of the net profits of the practice. It is possible but not required that the lessor would refer some business to the attorney.

It further appears that the lessor would likewise have a conference room near the attorney's office for use by the attorney on a per case basis (presumably for closing loans of the lending institution), with a rental charge for use by the lessor to the attorney involved with such charge to be passed on to the client as a separate charge in addition to the regular attorney's fees. There is no indication as to whether the attorney is required to use the conference room in connection with any particular business he handles or the amount of the proposed rental.

Questions

1. Would such an arrangement be a violation of Disciplinary Rule 3-102?

2. Would the lawyer involved be in violation of Disciplinary Rule 2-103?

3. Would the lending institution be guilty of unauthorized practice of law?

4. Would the rule be different if a percentage of the net profits were paid as additional rent?

5. Would the rule be different if the additional rent is based on a percentage of a specified type of practice?

6. Would the proposed arrangement with reference to the conference room violate any provisions of the Code of Professional Ethics of the State Bar of Texas?

Opinion

It is the opinion of the committee that the proposed lease arrangement would be in violation of Disciplinary Rule 3-102 regardless of whether the additional rental is based upon a percentage of the gross fees, a certain class of fees collected, or net profits from the practice of law. The same conclusion is required by Ethical Consideration 3-8. Opinions No. 2145, 2384, and 4003, respectively, by the New York County Lawyers Association, the Association of the Bar of the City of New York, and the Philadelphia Bar Association digested in Bar Association Ethics Opinions published by the American Bar Foundation in 1970 directly hold that an attorney may not pay a layman for use of his office a percent of his income earned in the office as rental.

If the lending institution lessor refers or is in a position to refer law practice to the attorney in conjunction with the suggested lease arrangement, it is the opinion of the committee that such would additionally be in violation of Disciplinary Rules 3-103 and 2-103. Ethical Consideration 2-8 is quite explicit in this regard:

". . . a lawyer should not compensate another person for recommending him, for influencing a prospective client to employ him, or to encourage future recommendations."

The committee is also of the opinion that such arrangement would be in violation of DR 3-101 as a necessary corollary to such arrangement being in violation of Disciplinary Rules 3-102 and 3-103.

It is the further opinion of the committee that the suggested arrangement relative to a conference room rental, which would presumably be charged in connection with loan closings handled by the attorney for the lending institution, would constitute an aggravation of the above violations.

The committee notes that the percentage of law practice earnings is by way of additional rent over and above a base rent, as distinguished from a percentage lease containing a base rental and a percentage rental with the tenant paying whichever would be the larger amount as is usual with mercantile establishments; however, the committee's opinion would be the same with regard to such commercial type lease arrangements.

The committee also notes that the implementation of lease arrangements of this character could involve violations of other ethical considerations and disciplinary rules of the State Bar dealing with the independence of the attorney and the attorney-client relationship. (16-0).