In early April, the Ohio Board of Professional Conduct issued its first two Advisory Opinions of the year. Last week’s article discussed Advisory Opinion 2025-1 regarding the confidential nature of uncertified grievance complaints and investigations. This article addresses Advisory Opinion 2025-2, Acquiring Mortgage Against Client’s Real Property to Secure Legal Fee. 

Advisory Opinion 2025-2 reviews Ohio Prof. Conduct Rules 1.5 and 1.8 in affirmatively answering the question: “May a lawyer secure legal fees by having a client sign a promissory note secured by a mortgage against the client’s residence?” The Opinion reviews the criteria required by R. 1.8(a) when an attorney enters into a business transaction (including securing a mortgage) with a client and further identifies the likelihood that such an arrangement will lead to a conflict of interest between the attorney and her client. Additionally, just as with all fee agreements, the overall fee must be reasonable and communicated to the client as required by R. 1.5.  

One egregious misadventure involving an attorney securing of a lien in lieu of fees resulted in the permanent disbarment of a northeast Ohio lawyer in 2015.  In the mid-2000s, the attorney purportedly negotiated a flat fee with a client and then recorded a mortgage lien against the client’s property two days before the client died. Later, when the client’s daughter hired him to represent the estate, the attorney did not disclose the conflict of interest that “arose when he was both a creditor of the estate and the attorney who was probating it.” 2015-Ohio-4904 at ¶15. He further failed to present the claim to the administrator of the estate or the court as required by statute. Instead, the attorney communicated with the title company to satisfy his lien directly out of real estate proceeds. In the disciplinary proceeding, the panel and board determined that his conduct in this matter violated several Rules of Professional Conduct, including R. 1.5(a) (charging or collecting a clearly excessive fee), and R. 1.8(a) (acquiring a security interest adverse to a client without meeting the requirements of the rule). Among other jarring claims misconduct, the Ohio Supreme Court voted 4-3 to permanently disbar the attorney. In a prior civil action, he was found in breach of his fiduciary duty and ordered to return the funds.

For attorneys wishing to enter business transactions such as promissory notes secured by a mortgage, careful adherence to R. 1.8(a) factors is required. The three required factors to enter into a business transaction with a client (or acquire a security interest adverse to the client) are: 

1. the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed to the client in writing in a manner that can be reasonably understood by the client;  
2. the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and 
3. the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Rule 1.8(i) permits the acquisition of a security interest in property in accordance with the requirements of division (a) whenever the property is not recovered through the lawyer’s efforts in the litigation. See Comment [16] to R.1.8.

While a lien against a client’s home is typically discouraged, attorneys insured by OBLIC should contact the Loss Prevention Hotline if considering such an arrangement to request a confidential ethics consultation with outside ethics counsel. 

This information is made available solely for loss prevention purposes, which may include claim prevention techniques designed to minimize the likelihood of incurring a claim for legal malpractice. This information does not establish, report, or create the standard of care for attorneys. The material is not a complete analysis of the topic and should not be construed as providing legal advice. Please conduct your own appropriate legal research in this area. If you have questions about this email’s content and are an OBLIC policyholder, please contact us using the information above.