My attorney wants a percentage of the deal — is that normal?

Why an attorney might propose a percentage

An attorney might propose a percentage of your deal if he or she views himself or herself as more than just a legal service provider. This often happens when the attorney is bringing value beyond legal counsel, such as sourcing deals, providing capital, or actively participating in the deal's structure and negotiation. In essence, he or she is acting as a joint venture partner, not just a lawyer.

He or she might also be willing to defer fees, taking a percentage only if the deal closes, which could be attractive in certain situations. This aligns his or her success directly with yours. However, this arrangement changes the nature of your relationship from client-attorney to business partners, which has significant implications.

The difference between legal fees and joint venture income

Legal fees are payments for professional services, typically hourly or a flat rate, and cover specific legal tasks like contract review or title curative work. Joint venture income, on the other hand, is a share of the profits from a business enterprise where both parties contribute resources and share risks. This is a fundamental distinction.

If an attorney is taking a percentage, he or she is expecting to be treated as an equity partner in that specific deal. This means he or she is participating in the profit and potentially the risk. This goes beyond the traditional role of an attorney simply advising on the legal aspects of a transaction. Understand which role he or she is intending to fill.

Potential conflicts of interest

When an attorney has a financial stake in your deal beyond his or her legal fees, a conflict of interest can arise. His or her advice might be influenced by his or her own financial gain rather than solely by your best legal interest. This is a serious ethical consideration for attorneys, and he or she should disclose any such conflicts to you.

You need to be aware that his or her role as a legal advisor could be compromised by his or her role as a profit participant. It is crucial to have independent counsel review such an arrangement if you proceed, or at least be fully aware of the dual role. This is not to say it is always bad, but it requires transparency and careful consideration.

Structuring a legitimate partnership, not just legal work

If you decide to proceed with an attorney who wants a percentage, you are essentially forming a joint venture. This means you need a clear, written joint venture agreement outlining everyone's roles, responsibilities, contributions, and how profits (and losses) will be split. This agreement should be separate from any standard legal services agreement.

Define what the attorney is specifically contributing to earn that percentage beyond standard legal tasks. Is he or she funding the deal, finding the buyer, or performing market analysis? Be explicit about expectations to avoid misunderstandings later. Treat him or her as you would any other business partner in this context.

What to clarify in writing

Any agreement for an attorney to take a percentage must be in writing and extremely clear. Specify the exact percentage, how it is calculated (gross or net profit), and what expenses are deducted before profit distribution. Define the duration of the agreement and the scope of deals it covers. This protects both parties.

Also, clarify if his or her legal services are separate from his or her partnership role and how those legal fees will be billed, if at all. Transparency in this documentation is key to avoiding future disputes. Always get everything in writing when dealing with money and partnerships.

When to politely decline and find a standard attorney

If you are uncomfortable with the conflict of interest, or if the attorney is not bringing significant value beyond standard legal services, politely decline the percentage arrangement. You should then seek an attorney who will operate solely as your legal counsel on a traditional fee basis. It is perfectly acceptable to want a clear separation of roles.

Your priority should be clear, unbiased legal advice to protect your interests in a transaction. If an attorney's financial stake compromises that, it might not be the right fit for your needs. There are many competent real estate attorneys who work on standard fee structures.

This is not legal advice.

This content is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.