Over the last decade, the commercial real estate world has changed dramatically for attorneys, who need to stay on top of new laws and market trends in environmental, land use and financing matters – all while being on the grid 24/7.
“There are a lot more subspecialties in handling a real estate transaction,” said Brian Sahn, a partner in the real estate practice group at Uniondale law firm Forchelli, Curto, Deegan, Schwartz, Mineo & Terrana. “As an attorney quarterbacking the transaction, you must have knowledge and be able to pull in experts in the different areas.”
Environmental concerns, for instance, are more prevalent today, according to Huntington attorney John Breslin Jr. In the early days of his law practice, which was established in 1987, “a lot of people didn’t even do environmental checks on properties,” he said. “Now, phase I environmental studies are automatic; if you don’t do one, you’re running a real risk.”
Attorneys must make sure buyers and sellers are aware of the history of the property, what potential contamination may have occurred, what types of tests and remediations will be required, how long they will take, how much they will cost and who will pay for them.
“Laws change frequently, and, on Long Island, we’re not dealing with raw, virgin land,” Sahn said. “You’re repackaging existing property and lenders have become a lot more concerned about the environmental history of properties, and sellers must be aware environmental conditions can directly impact the valuation of the property.”
In addition to the issue of potential contamination, many construction and retrofit projects involve green consulting. Today, many investors, landlords and tenants are interested in pursuing Leadership in Energy and Environmental Design certification and, in general, employing green building techniques to lower energy costs and carbon footprints and provide better air quality for employees.
“Some lawyers are becoming LEED accredited professionals, and there’s a need to tap into experts with LEED accreditation, such as architects and engineers,” Sahn said.
With regard to land use, “government restrictions never get looser,” Breslin said.
In today’s highly regulated environment, attorneys must make sure clients understand the limitations that land use and zoning codes will place on a potential project.
For instance, “in the old days, when you looked at the parking lot of a strip center, or even the old Roosevelt Field, you would see a field of blacktop,” Sahn said. “Today, you can’t do that; islands of trees and grass have to be embedded in the parking lots, which takes away parking spaces. You really have to dial in and use your engineer and land use people to figure out how to lay it out as efficiently as possible.”
In addition to municipalities, developers and their attorneys must deal with fire, water and sewer districts in negotiating approvals. When applying for a change of use, inefficiencies and politics have led to increasingly lengthy delays.
“The attorney must be careful about spelling out contingencies from a contractual standpoint, so a client’s downpayment money is not at risk until there’s a certain level of confidence that the municipal objectives will be achieved,” said Gary Meltzer, a partner and chairman of the real estate group at Meltzer, Lippe, Goldstein & Breitstone in Mineola.
When it comes to financing commercial real estate projects, “the days of simply going to your local community bank, which holds the loan until it’s satisfied or the property is sold, are almost gone,” Sahn said.
Securitized loans, whose use is widespread in the commercial real estate sector, are highly technical, requiring expertise from attorneys so they can advise their clients. In addition, attorneys must be well-versed in industrial development agency financing, which is more prevalent today, Breslin said.
Attorneys must understand trends in financing and the current dynamics between lenders and borrowers, which vary based on market cycles, said Matthew Lamstein, a partner who co-chairs the real estate practice group at Lazer, Aptheker, Rosella & Yedid in Melville. For instance, he said, current knowledge of market demands with regard to personal guarantees and non-recourse guarantees on commercial loans is vital to the negotiation process.
As the commercial real estate market becomes increasingly competitive, clients expect not only legal and business expertise from their attorneys, but contacts.
“Whether lenders, brokers, buyers or sellers, clients are looking to tap into your network,” Meltzer said.
And in the world of Internet marketing of properties, “things move quickly, and clients expect instantaneous response and performance from their lawyers,” he said. “Attorneys must be available 24/7 and hopefully not working on anything else from a client’s standpoint.”