## Facts

- An ethics inquiry described residential sales where, after signing a contract, counsel were asked to amend it to increase the stated purchase price and mortgage contingency by the same amount.
- The amended contract also provided a matching seller credit at closing labeled a “seller’s concession” or “seller’s payment of purchaser’s closing costs.”
- The scenario assumed the seller credit did not reflect legitimate buyer closing costs and was intended to obtain a larger mortgage and mislead lenders or secondary-market investors about the true price.
- The Advisory Committee on Professional Ethics (ACPE) issued Opinion 710 concluding that a lawyer’s participation in the described transaction would violate RPC 1.2(d), RPC 4.1(a), and RPC 8.4(c).
- After receiving multiple inquiries, the ACPE issued a written clarification stating Opinion 710 targeted fictitious, deceptive price increases unrelated to actual closing costs and did not bar expressly disclosed credits covering legitimate costs (e.g., actual closing costs).
- The New Jersey State Bar Association petitioned for review of Opinion 710 and its clarification; the Supreme Court of New Jersey granted review.

## Issues

1. Whether lawyers may ethically participate in real-estate transactions that use amended contracts and closing documentation to reflect a knowingly fictitious purchase price intended to mislead lenders or investors.
2. Whether Opinion 710, properly construed, impermissibly swept in common “seller concession” practices involving transparent credits for legitimate closing-related expenses.
3. How RPC 1.2(d), RPC 4.1(a), and RPC 8.4(c) apply to seller-credit transactions that affect the stated purchase price and mortgage amount.

## Decision

- The court upheld Opinion 710’s core conclusion that a lawyer may not participate in a transaction involving a knowingly fictitious purchase price or other material misrepresentation designed to mislead financing sources.
- The court approved the ACPE’s clarification limiting Opinion 710 to deceptive arrangements and excluding openly disclosed seller credits for legal and legitimate sale-related costs.
- The court directed that Opinion 710 must be read together with its clarification to define its operative scope.

## Legal Principles

- RPC 1.2(d) forbids a lawyer from counseling or assisting a client in conduct the lawyer knows is illegal, criminal, or fraudulent; preparing or facilitating documentation that intentionally misstates the economic terms of a deal to mislead lenders falls within the prohibition.
- RPC 4.1(a) prohibits knowingly making a false statement of material fact to a third person and requires disclosure of a material fact when necessary to avoid assisting a client’s criminal or fraudulent act in a transaction.
- RPC 8.4(c) bars conduct involving dishonesty, fraud, deceit, or misrepresentation, including participation in documentation that reports a fictitious purchase price.
- A seller credit is not unethical per se; lawyer participation is permissible when the contract and related documents accurately and expressly disclose a credit for legal and legitimate costs or expenses (such as actual closing costs), rather than using a concealed credit to create a false price signal.

## Conclusion

The court sustained the prohibition on attorney participation in real-estate transactions that use fictitious price inflation and offsetting credits to mislead lenders or investors, while confirming that clearly disclosed seller credits for legitimate closing-related costs remain ethically permissible.


In re Opinion 710 of the Advisory Comm. on Pro. Ethics, 193 N.J. 419, 939 A.2d 794 (2008)