BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Attorney Client Privilege and Confidentiality
As a real estate agent, you are always in the position of educating, counseling and advising clients on matters related to their property, the purchase agreement, disclosures and escrow. Real estate licensees do this every day in dealing with clients and transactional matters.
The issue always comes up as to how far agents can go in giving advice without crossing a line into the unauthorized practice of law.
If an agent crosses the line in giving legal advice to a client, the result could be civil damages, a license suspension or revocation by the DRE; or even a misdemeanor. Even the NAR Code of Ethics states:
“Realtors shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.” Article 13
For more information on how drafting complex documents can lead to an allegation of the unauthorized practice of law, see Weekly Practice Tip entitled “Unauthorized Practice of Law” May, 2005
If you, in your capacity as a real estate broker or agent, contact an attorney for advice on how to proceed in a transaction, you need to recognize that the advice given by the attorney to you is covered by the attorney-client privilege. However, that privilege is waived if you pass along the information to your client by:
1. Forwarding to your client a written communication from your attorney to you; or,
2. Stating to your client: “My company’s attorney advises that. . . “
Worse, by passing along to your client the advice your company’s attorney gives you, you risk your client interpreting this to be legal advice to them from you, your brokerage and your company’s attorney.
This, of course, could then lead to the charges and liabilities mentioned above.
PRACTICE TIPS
1. Do not forward to your client(s) any written communications from your company’s attorney. That includes e-mails, and these Weekly Practice Tips which are designed to give advice to agents and not intended for advice to sellers or buyers.
2. Never advise your client , “I checked with our company’s attorney and here is what you should do. . .” This can be interpreted as having given the client legal advice.
3. It is all right, if asked, to tell your client that you checked with your attorney regarding how YOU (the agent) should proceed in acting as an agent (e.g., “My attorney has advised me that I must disclose . . .”; “My attorney recommends that we use the ________form for this purpose”, etc.)
4. But, when it comes to giving advice to your client as to what the CLIENT should do, it is best not even to mention that you have discussed the matter with your company attorney.
5. In giving advice to your client as to how the client should proceed, if you feel that you are getting into an area where you may be advising the client on an issue that may have legal implications (e.g., whether a contract has been ratified; whether the client may safely cancel the contract; whether seller or buyer would be entitled to the deposit, etc.) you should respond as follows:
“As a broker it is my understanding that, based on the (contract, disclosures or events), you have a right to (cancel the contract, keep buyer’s deposit, etc.) However, I am not an attorney and your decision (to cancel the contract, to attempt to keep buyer’s deposit, etc.) may have legal implications; so I recommend that you discuss this with your attorney before proceeding.”
That way, you are not crossing a line where a client could later claim that you told them what to do, and, as a result, they had to retain an attorney to defend a claim or respond to an attorney on the other side of the sale.
6. DOCUMENT THE FILE: It is also wise to document your discussion with your client with a follow-up e-mail confirming the discussion. That way there can be little room for confusion by the client as to what your advice was.
7. CONFIDENTIALITY OF IN-HOUSE COMMUNICATIONS: If you are seeking advice from your manager or broker by e-mail as to how to proceed (or are a manager or broker advising your agent by e-mail on how to proceed), be aware that, in the event of litigation, those e-mails are not confidential and may be discovered by the other side.
RULE OF THUMB: Except for e-mails to your attorney (which are covered by attorney-client privilege), never put anything into an e-mail that you do not want blown up six feet high on a court room wall.
This Weekly Practice Tip is attorney-client privileged and for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2008
