Ethics Hotline & Opinions

ETHICS DOCKET NO. 1987-48

"

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1987-48

Maryland Rules of Professional Conduct, Rule 1.15, Rule 1.4, and Rule 2.1


Your inquires are stated:

""1. Is an attorney permitted under the Rules of Professional Conduct to disburse funds at the closing to the Seller or Realtor prior to recordation of any instrument or the deposit into the attorney's trust or escrow account of the Purchaser's down payment and any loan proceeds?""

""2. To what extent must an attorney disclose the business risk of intervening liens, encumbrances and conveyances if funds are disbursed at the closing as set forth in inquiry number 1?""

Additionally, you state you are aware of Ethics Docket 79-17 (copy attached) essentially answering those inquiries but ask this Committee to reconsider that prior opinion ""given the general change in the economic climate and lending institution failures.""

  In any event, in accordance with part of Rule 2.1 ""In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factor that may be relevant."" Those factors you raise are business risks which are inherent in settlement practice. As stated in Docket 79-17: ""Each attorney must weigh the risks and determine his or her own course of action.""

  Regarding your first inquiry, Rule 1.15 extends a lawyer's professional responsibilities regarding other's property to third persons. Otherwise, the new Rules of Professional Responsibility are substantially the same as the Code of Professional Responsibility upon which Docket 79-17 was based. That opinion deferred, as this Committee will, from establishing guidelines for conducting real estate settlements because to do so would far exceed our province of ethical considerations.

  Docket 79-17 clearly reviewed prior ABA Opinions with comment that monetary transaction attendant to settlement be in cash. Presumably, for practical consideration, that Committee further opined it permissible for settlement disbursements to be made by the settlement attorney after tender and receipt of at least a certified check instead of cash and immediate deposit of that certified check to cover the disbursements. In the case of personal checks, bank checks, cashier's checks or wired funds, disbursement may not be made before the actual crediting to the settlement attorney's trust account. To disburse funds from that trust account prior to the deposited funds being collected would be an impermissible use of other client's funds. Rule 1.15

  As to what disclosures the settlement attorney should ethically make, this Committee recommends application of Rule 1.4 (communication), and depending upon whom the settlement attorney represents, the following rules may be applicable:

2.1 Advisor

2.2 Intermediary

2.3 Evaluation for use by Third Persons

  You are also recommended review the statutory requirements of Article 10, Section 44 regarding ""Escrow Funds of Attorneys.""


"
DISCLAIMER: Opinions of the Maryland State Bar Association (MSBA) Ethics Committee are an uncompensated service of the MSBA. This Committee’s opinions are not binding on the Maryland Court of Appeals, Maryland Attorney Grievance Commission, MSBA or this Committee. The reader is advised that subsequent judicial opinions, revisions to the rules of professional conduct, and future opinions of this Committee may render the Opinions stated herein outdated. As such, the Committee’s opinions are advisory only and neither the Committee nor the MSBA assumes any liability whatsoever with respect thereto. Accordingly, reliance upon the opinions of this Committee is solely at the risk of the user.