Lawyers’ Heightened Standards of Care and Ethics in Real Estate

Risk management has always been a key responsibility of real estate managers and the attorneys who advise them. For that reason, many real estate offices have implemented policies that prohibit real estate agents with other professional accreditations from advertising their credentials. For example, some real estate brokerages say that licensed attorneys may not include “J.D.” or “Esq.” on their business cards because doing so may subject them to a higher standard of care. As one might imagine, many real estate brokerages want to be held to the lowest possible standard because it means the lowest potential for liability.

While the idea of applying a varying standard to different people in the same industry may seem unfair, it actually makes perfect sense. After all, clients who are asking for contract interpretation, deal-structuring advice, or the likely outcome of a dispute should expect a more reliable answer from someone who they know is an attorney. On the other hand, if the clients faced the same type of problem and they were represented by a real estate agent who lacked that type of professional background, the clients would be more likely to go out and engage outside counsel to provide the same advice.

Along the same lines, attorneys may be held to a higher ethical standard than real estate agents who are not members of the State Bar of California. The Standing Committee on Professional Responsibility and Conduct issued Formal Opinion No. 1995-141, which provides “when rendering professional services that involve a fiduciary relationship, a member of the State Bar must conform to the professional standards of a lawyer even if the services performed could also be rendered by one licensed in a different profession” (Sodikoff v. State Bar, (1975), 14 Cal.3d 422, 429; Libarian v. State Bar (1945) 21 Cal.2d 862, 865; Jacobs v. State Bar (1993) 219 Cal. 59). Based on the above-cited ethics opinion and cases, it is clear that a stricter code of ethics, generally applied to attorneys, will apply to the transaction. That is one of the reasons I believe that the restrictions on attorney solicitation most likely prohibit a Realtor®/attorney from many of the types of direct in-person “prospecting” tactics that are conducted by many brokerages and agents, such as “door-knocking” or phone solicitation of an expired listing.

At DeLeon Realty we have made the conscious decision to openly advertise our professional credentials. We are well aware that having licensed contractors, accredited interior designers, and licensed attorneys will cause clients to expect more from us; however, we expect more from ourselves. We believe that clients should expect accurate professional advice when involved in a real estate transaction. When we answer tax, legal, construction, or land-use questions, we know that our clients will be relying upon that advice, and we are fully prepared to stand behind our answers.

This is certainly not to say that this approach is the right decision for everyone. Many brokerages have a much higher ratio of independent contractor agents to office staff and management, and they are less able to supervise the advice given by the individual agents. From an office’s point of view, it is certainly far more conservative and safe to instruct all agents not to include professional accreditations such as “J.D.” or “Esq.” on their business cards.

Risk management is an important part of the management of a real estate brokerage; however, DeLeon Realty believes the best way to manage risk is by providing our clients with the best possible advice. When a client is well advised at every step of the transaction, they are less likely to make a costly mistake. Fundamentally, we believe that our clients deserve the highest level of advice, analysis, and insight and we will continue to provide that advice irrespective of the increased liability to us.