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A real estate broker who is also an attorney contacted the owner of real property in March, 1957 concerning the sale of such property (a motel). The property was situated outside of New York. In May the broker was employed by an attorney in New York as his law clerk at $40 per week. The employing attorney understood that the broker, who was married and had two children, would continue to work on his own time as a real estate broker to supplement his income.
In June the owner of the property came to New York and the broker introduced him to a prospective buyer. The broker had known of the buyer before being employed by the attorney and he also knew that the owner was a client of the attorney. The employing attorney, who also had a proprietary interest in the purchase of the property, insisted that unless the broker agreed to divide the commission with him he would prevent consummation of the deal. The broker agreed and the employing attorney prepared a letter which they both signed stating that the attorney was co-broker and that the commission was to be divided equally between them. The attorney disclosed to his client his interest in the commission and that the broker was employed by him, and he represented the owner in connection with preparing and signing the contract. The broker did none of the legal work for the seller. The contract of sale was signed and in it the broker was recognized by both the buyer and the seller as the broker who brought about the sale. It is expected that the title will close shortly.
The specific question asked is whether it is ethical for the employing attorney to share the commission of the broker in this transaction. I have told the attorney who prepared the statement of facts and asked this specific question that there might be other questions of ethics on which the Committee might wish to comment.
The attorney should not be permitted to share in the commission of the broker under the circumstances recited in the question. Aside from other considerations, it is not proper for an attorney representing the buyer to threaten to prevent consummation of an otherwise advantageous purchase, as a means of obtaining a share in a commission payable by the seller.
November 7, 1957.