Wednesday, February 6, 2008
The New Jersey Supreme Court issued an opinion today concerning "the ethical propriety of a real estate transaction that the inquirer believed was a fraudulent practice perpetrated on the ultimate investor." The New Jersey State Bar Association had sought review of an opinion and subsequent clarification by the Advisory Committee on Professional Ethics. The specific practice of concern involved contract amendments intended to increase the size of the mortgage that might deceive the lender as to the true market price of the house.
The court concluded that disclosed seller's concessions to amend the contract are not "in and of themselves, fraudulent or unethical...[t]he court is confident that attorneys in this state know that they cannot participate in deceptive transactions...[the ethics opinion] stands for the unremarkable proposition that fraudulent transactions by attorneys in connection with real estate closings will run afoul of the RPCs. With that in mind, lawyers versed in their ethical responsibilities have nothing to fear from Opinion 710." The advisory committee opinion is attached to the court's ruling. (Mike Frisch)