Was dual representation in real estate deal legal malpractice?

On Behalf of | Jan 10, 2013 | Legal Malpractice Law

In many types of legal transactions here in New Jersey, it is wise for each party to enlist an attorney to protect their interests. It is generally not advisable for the different parties to work with the same attorney, as joint representation can create a conflict of interest and invite major risks.

A legal malpractice case that is taking place in the Midwest involves this very issue. The case stems from a real estate transaction in which the same attorney represented both the buyers and the sellers, ultimately allowing the buyers to unknowingly buy into property that was saddled with a crippling mortgage.

The buyers have now sued the attorney, accusing her of legal malpractice as well as breach of fiduciary duty, negligence and breach of contract.

The property at the center of the real estate transaction is a bed-and-breakfast in Wisconsin. In 2002, the then owners of the property took out a $700,000 mortgage on it and in 2003 they began talking with the plaintiffs about selling the property, without telling them about the mortgage.

Two years later, the plaintiffs decided to purchase an interest in the property, using a lawyer that the sellers recommended to jointly represent them.

The lawyer reportedly did not communicate with the buyers, and she did not inform them about the existing mortgage nor complete or recommend a title search.

The buyers paid $530,000 to the sellers for a 40 percent interest.

By 2011, the sellers had taken out two more loans on the property without the plaintiffs’ consent or knowledge. The property was ultimately foreclosed, causing the plaintiffs to lose their $530,000 investment as well as $200,000 in legal fees.

At the center of this legal malpractice case is the question of whether the attorney’s dual representation led her to shortchange the buyer. Dual representation is not common practice as it may result in conflicts of interest making it improbable for the lawyer to protect the interests of both parties.

Source: Minnesota Lawyer, “Dorsey sued over dual representation,” Barbara L. Jones, Jan. 4, 2013

  • Unfortunately, New Jersey residents are sometimes harmed by the ethics violations of their attorneys. To learn more about pursuing a legal malpractice claim, please visit our litigation and appeals law firm’s Lawyer Conflict of Interest page.
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