A husband who wanted to divorce his wife contacted an attorney about retaining his services. The attorney and the client agreed to an hourly rate of $150 per hour, but the attorney asked the husband for a mortgage on the husband’s house to secure payment of the fee. The attorney then presented the client with his standard representation contract and mortgage documents. Why is the mortgage a violation of the Model Rules?
Explanation
Answer: C - Because the use of a mortgage is a prohibited business transaction with a client. A lawyer may not enter into a business transaction with a client unless the terms of the transaction are fair and reasonable to the client, the terms are fully disclosed in writing, the client is advised to seek advice of independent counsel, and the client gives informed consent in writing. Model Rule 1.8(a). Model Rule 1.8(i) allows an attorney to acquire a lien to secure a lawyer’s fee, but only if the lien is authorized by law. Answer C is the best choice because the security interest created by the mortgage is a business transaction with a client and the attorney has not complied with the requirements for business transactions with clients (and nothing suggests an attorney may take a mortgage as a lien in this jurisdiction). Neither Answer A, nor Answer B is the best choice because the Model Rules do not prohibit a mortgage to secure payment of fees in divorce cases and whether a mortgage can be used is not affected by an attorney’s hourly rate.
