Beatrice came to our office distraught and disheveled.1 Her health was failing, and she could not work or pay her bills. She had fallen behind on the payments for the land on which she lived. Now the seller was going to take the property back, and she did not know what to do. Surely we could help her? But, no, we could not.
Beatrice’s story is not new. Even though our organization, the New Mexico Center on Law and Poverty, is not a direct legal services provider, we are the go-to referral shop for cases such as Beatrice’s simply because so few attorneys for the poor know real estate law. But we could not help Beatrice because we already represented an adverse party in the case: her neighbor, Sara. Beatrice had contracted to sell part of her parcel to Sara even though she did not yet have title to the land. Although Sara had made all her payments on time, if Beatrice lost the land, Sara would lose her part as well.
We explained to Beatrice that we could not help her because we were already representing Sara, but this distinction seemed lost on her. In Beatrice’s mind, both she and Sara were victims of the seller. Having seen how often this seller had contracted with low-income buyers only to snatch back the property when they missed a payment, we agreed with Beatrice. But our client’s clearest claim was against Beatrice for breach of contract. Beatrice was quite unguarded about her failure to deliver on her promises. Beatrice lamented that she did not intend to make any trouble for Sara, and that she would pay Sara back when she got back on her feet. She would likely have given us any information we asked for about her financial situation and assets. She might have signed a statement saying that she had harmed our client. She was an open book.
What’s a poverty lawyer to do? We signed up to level the playing field—David against Goliath. How should we deal with unrepresented opposing parties who do not seem to understand the meaning of a conflict of interest? What happens when the real wrongdoer shields himself from liability, and the clearest recourse for a client is against someone who is also a victim of the inequities of power in the system? These questions come into sharp relief in the context of the sale of real property, but they also arise in family law, landlord-tenant disputes, and a host of other areas. Ultimately how do we reconcile the requirement to advocate zealously on behalf of our clients with the reality that we could just as easily have been representing the other party if only she had come through the door first?
How should we deal with unrepresented opposing parties who do not seem to understand the meaning of a conflict of interest?
We propose that while poverty lawyers must honor their ethical obligations to their clients, they also have a heightened moral and professional duty to others affected by the case—including adverse parties—who are low-income and unfamiliar with the legal system. We believe it possible to honor these ethical and moral obligations simultaneously. Here we explore what that standard of representation might look like in the context of real estate contract disputes.
Real Estate Contracts in New Mexico
Real estate contracts are simple agreements to purchase land—such as rent-to-own for real property. Unlike in a traditional mortgage, the real estate contract purchaser does not obtain title until the property is fully paid. This places considerable power in the hands of the seller, who does not have to go to court to get the property back in the event of an alleged or actual default. Low-income buyers turn to these contracts because they allow individuals with no or poor credit a path to home ownership.
Although they may go by a different name—in Texas, for example, they are called contracts for deed—real estate contracts are used across the country.2 Real estate contracts are particularly prevalent in “colonias,” communities near the U.S.-Mexico border with underdeveloped infrastructure and high poverty levels. Many states have acted to provide some basic statutory consumer protections to real estate contract purchasers. Of the states that border Mexico, only New Mexico leaves these instruments unregulated.
Pajarito Mesa, where Sara and Beatrice tried to buy land, is like a colonia in every way but its proximity to the border. Most residents of the Mesa have no access to electrical or natural gas lines. They drive on unpaved, undedicated roads. Their children must travel miles to the nearest school bus stop because the buses do not venture beyond the edge of the Mesa. Emergency teams have difficulty responding because of the lack of addresses. Mesa residents had no source of water until the spring of 2010. Even now, they must carry water back to their homes in cisterns from a water station at the edge of the Mesa.
Often, real estate contracts in colonias and colonia-type communities like the Mesa track a predatory lending model: the seller executes dozens or even hundreds of transactions each year in one community. The contracts are promoted as a hassle-free way to buy land with no or poor credit. Sometimes these purchases work out, but too often they are a way for the seller to enjoy cash flow without incurring the duties and costs of a landlord and with a high likelihood of retaining the property in the end.
Most people who buy land on Pajarito Mesa do so through a real estate contract. Some, like Sara, make all of their payments only to find they cannot get title to the property because the person they contracted with does not have title to the land herself. Others make payments for years and lose their land and entire investment after missing a single payment. And some have moved onto the land and improved it as they paid for it, only to discover that—due to improper subdividing and a lack of legal description in their contract—they built a home on land belonging to someone else.
Ethical Rules on Communications with Unrepresented Parties
Under the ethical rules, a lawyer has a duty to advocate zealously on behalf of her client. At the same time, she has a duty to avoid giving legal advice to an unrepresented person whose interest is in conflict with her client’s interest. Navigating these two obligations can be difficult in itself, but these real estate contract cases bring a third consideration into the mix: a lawyer’s moral duty not to take advantage of an opposing party who is, in important respects, much like her client.
Prof. Russell Engler has written extensively about the need for regulation of lawyers’ communications with unrepresented, low-income people.3 He notes that, because of the dearth of legal services for poor people, more than 80 percent of the legal needs of the poor and working poor are currently unmet.4 Although negotiations in a variety of contexts are commonplace between lawyers and unrepresented low-income people, the ethical rules “virtually ignore this scenario.”5
In fact, only one of the Model Rules directly addresses communications between attorneys and unrepresented lay people. The rule prohibits giving legal advice to an unrepresented person and imposes a duty on the attorney to do her best to explain her role in the matter and any potential conflicts that arise from that role:
In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.6
The comments on this rule elaborate that in a situation involving unrepresented persons whose interests may be adverse to those of the lawyer’s client, the risk to the unrepresented person is so great that the attorney is forbidden to give any advice apart from the advice to obtain counsel.7 At least one commentator has argued that a “fairer” reading of this rule is a narrower prohibition on giving legal advice that leaves the impression the attorney is disinterested.8 Either way here our concern is not what constitutes “advice” (a topic that has been well covered by others); it is whether, while carefully steering clear of giving advice, an attorney can still run afoul of her ethical or moral obligations—particularly when clearly the unrepresented person misunderstands the lawyer’s role in the matter, despite the lawyer’s “reasonable efforts” to correct that misunderstanding.9
The lawyer-lay person power dynamic creates a significant risk of undue influence.10 Some have concluded that, in light of the inherent risk of misunderstanding and overreaching, the only way to communicate ethically with an unrepresented person is for the lawyer to “make clear that … she is representing only the interests of [her] client and communicate only the client’s proposed course of action without the elaboration of legal or factual advice.”11
But the poverty lawyer cannot always err so far on the side of caution. Communication with an unrepresented party is often necessary to reach a resolution; there are simply not enough legal resources to meet the needs of low-income people, and so refusing to communicate with any unrepresented low-income person would be impractical and work against effective representation of the client. The Model Rule on Diligence, which applies to an attorney’s duty to her client, states, “A lawyer shall act with reasonable diligence and promptness in representing a client.”12 The comment on this rule further explains:
A lawyer should pursue a matter on behalf of a client despite opposition, obstruction or personal inconvenience to the lawyer, and take whatever lawful and ethical measures are required to vindicate a client’s cause or endeavor. A lawyer must also act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf. A lawyer is not bound, however, to press for every advantage that might be realized for a client….The lawyer’s duty to act with reasonable diligence does not require the use of offensive tactics or preclude the treating of all persons involved in the legal process with courtesy and respect.13
Here we hope to explore the contours of the gray area implicit in this comment. What does it mean for a lawyer to act with zeal but not to “press for every advantage”? Given the dearth of clear ethical guidance on lawyers’ interactions with unrepresented low-income parties, how does a lawyer responsibly honor her duty to her client while ensuring that she does not take advantage of an unrepresented party in the process?14
Case 1: Sara and Beatrice. Sara was renting an apartment in town when she heard there was affordable land for sale up on Pajarito Mesa. Beatrice owned a large piece of property and was willing to sell a chunk of it under a real estate contract. They reached an agreement, and Sara made a substantial down payment, then paid the balance off over the course of a year. But when Sara asked Beatrice to turn over title to the property upon making the final payment, Beatrice said she could not.
Beatrice confessed that she was still making payments on the larger parcel from which she had carved out Sara’s land (something she had not told Sara before). Beatrice assured Sara that she would soon gain full title and asked for her patience while she got together the money to pay off her own real estate contract. Sara agreed and moved her family to the property. Periodically Sara asked Beatrice about the title, but Beatrice always asked her to wait as something always stood in the way of finishing her payments: she had lost her job, became ill, did not get the tax refund she expected. After about three years, Sara became concerned enough about it to speak with the county agent in the area. The agent gave Sara the contact information for the seller, Mr. J.
Sara learned that she was on the brink of losing everything. Mr. J said that Sara had no right to live on the property because Beatrice was not allowed to sell it. Further, he was taking Beatrice to court because she was several years behind in payments to him. He told Sara that she and her family needed to leave. That’s when she came to our office. We knew that Mr. J was one of the primary sellers of land in this area and that his sales often involved this type of troubled transaction.
Sara had a few options, but her legal recourse seemed limited—particularly because she was interested not in money damages but in keeping the land. Her most clear-cut claim was against Beatrice, but Beatrice was likely too destitute to pay them back and could not provide what Sara wanted—title to the property. Because Sara had no direct contractual relationship with Mr. J, a claim against him would be more difficult, but he did have the power to give them title. We agreed to set up a meeting with Mr. J.
We told Sara before the meeting that we had two primary goals: to negotiate a favorable outcome and to extract as much information as possible to aid in a lawsuit against him later. We had spent years researching real estate contracts as a predatory lending instrument in New Mexico, and Mr. J was at the top of our “most wanted” list. A review of county records revealed what a profitable business Mr. J had built using real estate contracts: over the past 15 years, buyers under contract with Mr. J were twice as likely to default as they were to purchase a piece of land successfully. On average, people made payments for seven years before they lost their land. In one case a buyer who fell behind lost everything after making payments for 17 years. Mr. J also carefully constructed his real estate contracts to skirt the requirements of New Mexico laws that would have mandated his investment in infrastructure to ensure that the parcels he was selling were habitable. The county had sued him in the past to try to stop his predatory practices—and he had won.
The meeting went well. We worked out an agreement that would allow Sara to keep the property she lived on and begin making payments on the parcel for which Beatrice was in arrears. Meanwhile, we had learned much of what we wanted to know from Mr. J about a possible action against him later.
Then Beatrice unexpectedly showed up at our office. Beatrice was very agitated. We told her right away that we represented Sara and could not offer her legal advice because our client’s interests were adverse to hers. Beatrice said she understood and wanted to speak with us anyway.
Talking to Beatrice had many implications. We were interested in finding out whether Beatrice had assets that could be used to make Sara and her family whole should they sue her for breach of contract. But we also thought Beatrice might have information about Mr. J—information that might help us take action not just to get Sara the remedy she wanted but to stop Mr. J’s systemic and predatory real estate contract practices. Beatrice was distraught and began talking before we could ask many questions. She told us about her physical and mental health problems, and how these problems caused her to lose her job and get behind in her payments to Mr. J. She told us that she had used up her meager savings and that she had no money at all. That said, she was very sorry about the predicament she had caused Sara and her family and was determined to make it up in some way.
We could easily have used Beatrice’s vulnerability to our client’s advantage. She was agitated, crying, and contrite. She seemed to be truthful and we could likely have gotten a fair amount of information that we could use against her. The ethical rules clearly state that we should advise her to get her own lawyer (we did) and could give no other advice (we did not.) But in our capacity as attorneys for Sara, should we have tried to get her to put her admission of liability and a promise to repay in writing? She likely would have signed such a statement had we put it in front of her. Should we have asked her questions about her financial information, such as bank accounts and the source of any government aid or other income she received? We thought about it and did not ask her those questions. In many ways, she was in a worse position than Sara: destitute and on the verge of a mental breakdown. While we would likely have been safely within the ethical rules to ask those questions, we felt that asking them would violate our ethics as poverty lawyers. In this situation, “pressing for every advantage” seemed wrong. Did we fail to meet our obligations as Sara’s attorneys by holding back?
The ethical poverty lawyer has to be thoroughly honest, even—maybe especially—with the vulnerable adverse party.
Case 2: Mónica and the Gonzalezes. Mónica was five years into a seven-year real estate contract when she discovered the land she thought she was buying had already been sold to someone else. Years earlier a transcription error resulted in Mónica’s land being improperly encumbered by her neighbor’s mortgage. Because her real estate contract had never been recorded with the county (a common practice in colonias), the mortgage lender’s title search had not turned up any competing claim to the property. When the neighbor defaulted on his property, Monica’s land was included in the foreclosure sale. Mónica learned about the sale only when it was over and a real estate agent knocked on her door to explain that the agent was showing the property to prospective buyers.
Mónica had contracted to buy the property from an elderly couple, Mr. and Mrs. Gonzalez. After some investigation, we discovered that, at least according to the county records, the Gonzalezes did not have title to the land they were selling to Mónica. The transcription error resulted in the land being deeded to the neighbor, lost, and then sold to the bank. Mónica did not want her money back; she wanted to keep the land she had been buying and living on for the past five years, finish making her payments, and get the title. She and her husband had cleaned up the land, planted fruit trees, and built a small house on the property.
Getting the property back meant a lot of contact with the Gonzalezes, who had information about how to contact the neighbor—who had long since vacated his property—and had copies of the original contracts of sale. But we had to navigate contact with the unrepresented Gonzaleses carefully since we knew that if efforts to get the land back failed, Mónica’s clearest damages claim would be against them.
We had many phone conversations with the Gonzalezes over the two years it took to sort out Mónica’s case. Building a friendly rapport was essential to getting the information we needed to move forward. We had to inspire the Gonzalezes’ trust to convince them to provide the help we needed to unravel the facts of this troubled transaction. But this seemed to give the Gonzalezes the impression that we could act in their interest as well as Mónica’s, no matter how many times we explained that because we represented Mónica, we could not represent them.
We recommended that they get their own attorney in the matter, but a series of health and family misfortunes prevented them from scraping together the cash. Despite our consistent message to them—in every conversation—that we were not representing them, on some fundamental level the Gonzalezes thought of us as their attorneys. Cutting off contact was not an option—we needed to communicate with them to obtain the best possible outcome for our client. We always feared that our efforts with the bank would fall through, and we would end up bringing a claim against the Gonzalezes for the money Mónica had lost. While we would have filed the claim had it been in the best interests of our client, we knew the Gonzalezes would perceive this as a completely unexpected betrayal. In one phone conversation, Mrs. Gonzalez confided that she felt confident she and her husband would obtain a good outcome because they had never meant to harm anyone and because they had such a good team looking for a resolution. She then told us that she and her husband were so thankful that we were working on the case.
Mónica’s case was eventually resolved cooperatively with the Gonzalezes. But what if it had not turned out that way? In the course of our communications with the Gonzalezes, we gathered a lot of materials and information that would have been useful in a claim against them—had one been necessary. If it had come to that, would our friendly communications with them have crossed some ethical line?
Guidelines for Poverty Lawyers Communicating with Unrepresented, Indigent Parties
Our communications with Beatrice and the Gonzalezes illustrate the twin perils of communications with unrepresented, indigent adverse parties. On the one hand, at what point does a failure to obtain information become a failure to advocate Sara’s interest zealously? On the other hand, where does regular communication and information gathering stray across the line into implicit legal or factual advice? As written, the ethical rules do not provide an answer. Based on our experience representing Sara, Mónica, and numerous other clients in similar situations, we offer the following four principles to guide poverty lawyers through the gray zone of not “pressing for every advantage.”
Prioritize Your Client’s Interests—but Consider All the Options. Our primary duty as attorneys is to represent our client’s interest to the best of our ability. But representing that interest does not always mean taking the most obvious route to a win in court or a favorable settlement. In fact, the single-minded desire to defeat the opponent could work against both the client’s interests and the lawyer’s internal principles. Manipulating Beatrice or the Gonzalezes to obtain information that we could use against them and then drafting a complaint for damages against them would have been easy. But that was not the best route to the outcome our clients wanted: the right to keep the land they called home. Pursuit of that result allowed us to think more creatively about courses of action. In Sara’s case, this meant dealing more gently with Beatrice and negotiating directly with Mr. J to find a deal that both parties deemed beneficial. In Mónica’s case, it meant working cooperatively with the Gonzalezes and many other parties to reach a settlement that kept Mónica on her land. There are often multiple routes to relief for a client. The adequacy of that relief and the harm to other vulnerable parties can and should be part of the discussion with the client about options.
In ethically complex areas, the Model Rules sometimes require communication in writing with the client.
Tell Your Client—in Writing—About Contact with Adverse Parties. In ethically complex areas, the Model Rules sometimes require communication in writing with the client.15 Even when the rules do not require it, keep your client informed about communications with adverse parties. This type of transparency serves as a check on the attorney’s ethical obligations to the client. Ideally each contact would be followed by oral and written communication explaining to the client the nature of the contact, what was learned, and what action was taken or not taken as a result. If contact happens with such frequency that a phone call and a follow-up e-mail or letter for each communication is impractical, the attorney should carefully maintain notes in the client’s file about each contact with the adverse party and should use a combination of oral and written means to ensure that the client is kept up to date on the status of any communications.
Acknowledge the Larger Ethical Context. As poverty lawyers, we do our work with a broad goal of correcting inequities within a system that disempowers and impoverishes people. Pitting one group of poor people against another often works, and we must be mindful of that as we serve our clients. Adverse parties may be, in a narrow, simplistic sense, the “wrongdoers”—but, like our clients, they are often are part of complex systems that work inequities in nearly every area of our clients’ lives. Viewed in isolation, Beatrice’s actions are appalling: she sold a piece of property she did not own yet, and when the buyer paid in full, she stalled and never delivered what had been promised. But when we step back to view the larger picture and acknowledge Mr. J’s systemic use of real estate contracts for his financial benefit, Beatrice also looks like a desperate victim of a predatory lending scheme.
Similarly the Gonzalezes failed to notice when they inadvertently sold the same piece of land to two different people. Although this was a mistake, there is a very good argument that they, not Mónica, should bear its consequences. The errors in this mortgage (issued in 2006 by no less than Lehman Brothers) and foreclosure (begun in 2009) are perfect examples of the problems endemic in a morally fraught mortgage system, where robosigning and the rush to foreclosure are responsible for property rights violations across this country.
In these types of cases, acknowledge particularly the way larger systems and contexts operate to exploit both parties—and look for solutions and courses of actions that vindicate clients’ rights without exacerbating that exploitation. Lawyers should integrate a discussion of the larger context into conversations with the client, who may see a situation differently if she momentarily steps out of her own shoes and into those of the adverse party. If the client does not, then the lawyer may have a decision to make about working on the case, and so this discussion should happen before a representation agreement is reached.
Be Explicit When You Explain “Conflict of Interest”—and Repeat Your Explanation. The ethical rules require “reasonable efforts” to correct a misunderstanding of an attorney’s role in a matter. Those reasonable efforts must be more thorough when dealing with a low-income adverse party. “Conflict of interest” is not necessarily an intuitive concept, and simply explaining that “I represent Sara, so I can’t give you any legal advice” likely does not sufficiently clarify the nature of the conflict—especially if the lawyer is being friendly and empathetic. Be concrete when you explain these conflicts. Go so far as to say,
My job is to do what I can to solve my client’s legal problem. That might mean working with you to find a solution that works for both of us. But it could also mean that in the future, I have to take action that you will not like—and that could include taking you to court.
Repeat this explanation each time you get signals that the adverse parties misunderstand your role and are thinking of you in some way as “their” lawyer. This explanation should be accompanied by a recommendation that they seek their own representation, but, given the shortage of legal services attorneys, this is not enough. We must consider how to minimize the harm to the vulnerable adverse party and act accordingly. This, too, should be a part of conversations you have with your client.
Conversations with the Gonzalezes often produced serious stomach twisting, particularly when Mrs. Gonzalez would tell us that she was so grateful that we were working on the case. We dreaded having to take action against them if our negotiations fell through. In retrospect, that should have been a trigger again to be very explicit about the nature of our position. We could have said,
Mrs. Gonzalez, we appreciate your willingness to work with us to help resolve this case. We are glad you are giving us this information and we really hope we will be able to resolve this in a way that helps both you and Mónica. But please remember that we are Mónica’s lawyers, and that means not only that we cannot be your lawyer but that at some point we might have to take you to court if it is the best thing for Mónica.
The ethical poverty lawyer has to be thoroughly honest, even—maybe especially—with the vulnerable adverse party.
No set of ethical rules or guidelines can ever eliminate the moral tension inherent in representing one poor person against another. But the current Model Rules fail to provide meaningful guidance to poverty lawyers who regularly communicate with unrepresented, indigent clients—as we do in real estate contract cases. Poverty lawyers better represent our clients and our community when we acknowledge the larger systems working to disempower the poor and take active steps where possible to seek resolutions that minimize harm to both parties. By applying these guidelines in combination with the Model Rules, we are better equipped to advocate our clients’ interests zealously while stopping short of pressing for every advantage. The ethical poverty lawyer ought never to lose sight of the real adversary in the battle for social and economic justice.
Craig Acorn was a senior attorney at the New Mexico Center on Law and Poverty when this article was written.
Kelsey McCowan Heilman
New Mexico Center on Law and Poverty
924 Park Ave. SW, Suite C
Albuquerque, NM 87102
1 All names of clients and adverse parties in this article have been changed to protect their confidentiality.
2 Heather K. Way & Lucy Wood, Contracts for Deed: Charting Risks and New Paths for Advocacy, 47 Clearinghouse Review 286 (Nov.–Dec. 2013).
3 See, e.g., Russell Engler, Out of Sight and Out of Line: The Need for Regulation of Lawyers’ Negotiations with Unrepresented Poor Persons, 85 California Law Review 79 (1997).
4 Id. at 79–80.
8 Mark H. Aultman, The Story of a Rule, 2000 Detroit College of Law at Michigan State University Law Review 713, 723 (2000).
9 See, e.g., Engler, supra note 3, at 85–93 (reviewing history of Model Rule 4.3 and summarizing cases determining what constitutes “advice” under rule); Aultman, supra note 8.
10 Stephan Ellman, Lawyers and Clients, 34 University of California Los Angeles Law Review 717, 754 (1986).
14 Engler, supra note 3, at 80–158.