QLS warns against securing client fees with mortgage

Queensland Law Society (QLS) has issued Guidance Statement No. 41: Securing Client Fees with a Mortgage over Real Property.

The statement, created with the QLS Ethics Advisory Committee, provides important ethical guidance for solicitors who consider taking a mortgage over a client’s property as security for unpaid legal costs.

While a law practice may be entitled to seek reasonable security for fees, the QLS warns that obtaining a mortgage over a client’s home or other real estate may create a significant and inherent conflict between the solicitor’s and the client’s interests.

The guidance emphasises that such arrangements should be approached with extreme caution. Solicitors must carefully assess whether the conflict can be appropriately managed and whether alternative fee arrangements are available.

The Society notes that balancing a client’s need for legal representation against a practitioner’s desire for payment security can be difficult, particularly where the security may place a client’s principal asset at risk.

Guidance Statement No. 41 identifies key ethical obligations arising under the Australian Solicitors’ Conduct Rules 2023, including duties relating to acting in the best interests of the client, avoiding conflicts of interest, maintaining professional independence and fiduciary obligations to the client.

The statement highlights that solicitors should ensure clients fully understand the implications of granting a mortgage, should carefully consider whether independent legal advice is required before entering into such an arrangement, and ensure the process is carefully documented.

For Queensland practitioners, the guidance serves as a timely reminder that such fee recovery mechanisms carry substantial professional and regulatory risks. The Society strongly encourages solicitors to consider less conflicted methods of securing payment.