Buying/Selling a Practice: Is it a transition or a transaction?
Are you interested in buying or selling a law practice? The WSBA has created a new Practice Transition Opportunities program where lawyers can sell or transition their practice and others can buy a practice.
Lawyers on both sides of the transaction should keep their ethical obligations to clients in mind. After negotiating the sale of a law practice, there must be an agreement between the buyer and the seller on an exact date of actual sale. The buyer and seller must agree on a specific date so the clients have notice.
Purchasing a law practice can also include a gradual transition period, during which the seller can provide valuable mentoring to the buyer. A few examples of mentorship that the selling attorney can offer include: introducing the new attorney to the staff and legal community, offering guidance on the practice area, and sharing practice experiences.
In Washington, the sale of a legal practice is governed by RPC 1.17.
RPC 1.17 includes the following conditions
- Before the transfer, the selling lawyer must give ample written notice to clients that they have the right to their files.
- The selling lawyer must also inform clients of their right to retain other counsel.
- All elements of client autonomy, including the client’s absolute right to discharge a lawyer and transfer the representation to another, survive the sale of the practice or area of practice.
- Fees charged to clients cannot be increased solely because a practice is sold. “The sale may not be financed by increases in fees charged the clients of the practice.”
WSBA advisory opinion 1658 states that selling a law practice gradually over a period of time is prohibited because it violates RPC 7.2 and 7.3. As a result, the actual sale, or transaction, must occur on an exact date so that the current clients of the law practice have notice and can choose whether to proceed with the new owner or obtain other counsel. However, the mentorship and skill building portion of the transition may exist beyond the transaction date.
Buying or selling a law practice can be a great opportunity for both parties to transition their legal careers. Please visit the Resources page to learn more about this program.