Are lawyers killing real estate deals?

Are lawyers killing real estate deals?

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Had to smile when reading this.

Via Property Report

The level of foreign direct investment into property can be affected by real estate lawyers with attitudes that kill deals. Sellers lose on income, buyers lose on investment targets, and monies are not exchanged, thereby slowing the economic cycle in the real estate segment.

Just who do lawyers think they are, interfering in deals? How can cautious, balanced, educated legal advice be tempered with the willingness to enter into a transaction? The line between deal killer lawyers and deal maker lawyers can be a blurry one, but in this article, I offer my opinions based on experiences with lawyers from different countries and backgrounds, and from having recruited and trained lawyers in Asia for 10 years.

All lawyers like to think of themselves as good at what they do—after all they have legal training and a license—but what actually makes a lawyer passionate about real estate? When I recruit lawyers or deal with them on the ‘other side of a table’, I try to remain open- minded, bearing in mind the best interests of my client regardless of the personality of other lawyers. A deal is made enjoyable when a courteous and polite lawyer, simply doing their best for their client, is involved in a transaction. An understanding of each party’s background and expertise, and appreciation of opinion whether aligned or differing, is conducive to a smooth transaction.

There are many different ‘types’ of lawyers, but it is possible to loosely divide certain traits of real estate lawyers into sweepingly general categories:

Academic lawyers

Generally, such lawyers are well- educated; have obtained a Masters of Law, perhaps internationally; and have often thought about becoming a judge. Oftentimes, the passion for in-depth reading of obscure materials can lead to a disconnect between these lawyers and the business world they’re operating in. Of course, many academic lawyers buck this trend and sharpen their edge by forging relations with business people and immersing themselves in business as well as law.

Commercially minded lawyers

In almost every brochure for top- and mid-tier law firms in the UK in the 90s, I saw phrases such as ‘our lawyers are truly commercially minded’ that were clearly intended to attract clients. However, you can often find that an expression of commercialism is removed from practicing commercial attitudes and beliefs. Commercially minded lawyers are able to accept that, notwithstanding their advice, caution, or the spelling out of risks to their clients, their clients can override advice in an attempt to achieve a commercial goal. In order to be able to operate in the midst of clients who are successful in their own right, lawyers have to understand that they are not the owners or providers within their client’s industry. Therefore, there are boundaries whereby commercial beliefs can override legal recommendations.

Such lawyers have immense value when the chips are down and clients have nowhere to turn except the courts to resolve a dispute. However, sometimes the worst thing to happen to a commercial real estate deal is a lawyer who is generally involved in litigation, dips into the commercial world, and approaches an amicable transaction as if it may transpose into war at any moment. This type of lawyer is generally a real estate agent’s worst.

Meandering, indecisive over- cautious lawyers

This type of lawyer rests on the fact that clients make the final decision, but to an extreme. Where clients are actually seeking guidance and direction, such lawyers simply bounce back questions to clients, fudge the purpose of the original questions, or ask their clients to choose, deeming every question a ‘commercial’ issue and not a legal one, and it therefore cannot be commented upon by the lawyer. This can create a glaring gap in the relationship between a client and a lawyer, and be the source of much frustration for clients who feel that they should not receive mostly questions or obfuscation in return for paying legal fees.

Aside from these ‘categories’ of lawyers, there are many instances of behaviours that damage real estate markets. I’ll describe lawyer’s deal- killing behaviours in Part two of this series.

About the Author:

Hughes Krupica is an international legal services firm, specialising in Real Estate; Hospitality; Leisure and Dispute Resolution legal services, with its head office in Thailand, and working in consultancies, across Asia.

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