David L. can't comment on legality here as I don't have all the facts (what template? did you purchase it? is the template licensed to be used for commercial use? - plenty of questions there). What I will comment on is that if you've purchased a template that allows for commercial use (the ability to be hired for a service and charge money for said service using the template) than you should be fine but I would read the commercial license that comes with it. If one is not stating it, I would likely not use it.
This question feels more like a moral one though and it depends on how you've positioned this to the client and how much you are charging.
Let's say the design template costs $300 and you charged the client $500 to design a custom website design....this seems reasonable to me.
For the same price, but you charge $5,000 and you've done very little customizations - I would say you've crossed a moral line.
For the same price, but you've customized it a lot and maybe the template saved you an hour or two but you charge $5,000 for the design and provided what you feel is $5,000 in value through graphical assets, copywriting or something else - that seems reasonable to me as well.
Again this feels less like a legal question and more of a question of what is ethic and moral right to do.
In almost any case, its always better to design and build something custom from scratch or using a design system/kit than a template because what is being provided is foundational pieces rather than the entire concept and allows you to move more quickly in a unique direction and I think if you are charging thousands of dollars, you owe it to your clients to put in that time and exploration.
Just my two cents on this topic - I'm not a lawyer (Man, I've said that a lot today....).
