In any sort of business, it’s essential to have a relationship with an attorney you trust. While attorneys sometimes get a bad reputation, I’d argue that most of them are great people who are critical to the success of your company. Regardless of your preconceptions about attorneys, I’d encourage you to give them the benefit of the doubt and approach a relationship with them in good faith.
Why a Good Attorney Is Critical:
1. A good attorney can coach you at critical points in your business.
As you manage your business, there will always be circumstances and issues that require external help and knowledge, especially from a legal point of view. Therefore, the ability to call an attorney you trust and ask him or her questions about the challenges you face as a business owner is definitely worth the investment.
2. A good attorney can handle a wide range of legal matters.
Beyond general wisdom and advice, a good attorney can be utilized for many different processes and procedures. Below is a list of ways a business can use an attorney:
- Setting up an LLC: In setting up an LLC (or other types of corporations), you protect your personal assets from the ones that you’re using to earn an income.
- Setting up a trust: The biggest reason to set up a trust is so your assets can easily pass from one generation to another without going to probate court.
- Evictions: When you own property and rent it out, you will inevitably get stiffed by somebody. Having an attorney who is familiar with the eviction process is invaluable. Oftentimes, even a demand letter from an attorney to a problematic tenant is enough to avoid an eviction.
- Drafting/reviewing loan documents for the bank
- Assisting in the buying and selling of properties during complicated deals
- Advising on issues with difficult or problematic neighbors
- Negotiating external threats from other parties: This can be extremely helpful in keeping an external party honest if they falsely accuse your business of a misstep. In today’s society, people are quick to sue, and if you don’t know how to proceed in legal issues, you will be at a disadvantage.
- Reviewing important documents: Attorneys can review deeds, easements, etc. and advise you in the process.
- Creating 1031 exchanges (a 1031 exchange is a way that you can postpone paying taxes on a property)
- Navigating liabilities and/or property damages
- Helping with human resources: If you get to the point where your company has employees, an attorney with HR knowledge is incredibly helpful when dealing with employee issues.
- Disclaimer: The above list is only a sampling of reasons why you would need an attorney. The reasons are endless.
3. An attorney can serve as a resource during interactions with your tenants.
There may be a handful of times where you need to show some strength and seriousness in interactions with problematic tenants. As mentioned earlier, a demand letter from an attorney can be helpful in avoiding evictions, but even copying your attorney in an email with a tenant can be an effective way to navigate contentious conversations.
4. In the rare instance that you would have to litigate an issue, a good attorney will be familiar with the courts in your area and the best strategy on how to succeed.
Finding an Attorney:
It’s better to find an attorney before you need an attorney. It would be terrible to get caught in a bad situation without any relationship to a legal professional. When looking for an attorney, it’s a good idea to ask people you know and trust for recommendations. Additionally, if there’s a title company you use on a regular basis for real estate closings, they may be able to recommend a knowledgeable real estate or business attorney.
Some attorneys will have a general practice where they can do a little bit of everything, while others specialize in specific areas. Larger markets tend to have attorneys with greater levels of specialization. Whether you go to a large firm or a small, private practice, the most important thing is that you find an attorney that you are comfortable with and can trust.
Choosing an Attorney:
When you start your selection process, I recommend asking potential attorneys a series of questions:
- What does the majority of your practice look like?
- What kind of cases have you handled the most?
- What is your experience in real estate law?
- Do you have any other partners in your practice? If so, what are their specializations?
(if the attorney works for a medium or large firm, chances are he or she has partners who can cover additional legal areas and offer their services to you)
- Is there a retainer or deposit required for your services?
- What is your hourly rate? (a good attorney will cost at least $200 an hour—I do not recommend going cheap on an attorney)
- How do you bill?
- Do you create 1031 exchanges?
Oftentimes, an attorney will meet with you once for free to assess what your legal needs are and gain a general understanding of you and your business. This is a great way to figure out whether or not you are a good fit for one another.
When Working With an Attorney:
After you find an attorney you want to partner with, it’s a good idea to establish touchpoints with him or her. Don’t pester your attorney, but let him or her know what you’re up to and what’s happening in your business.
Be honest with your attorney and share with him or her your values, risk engagements, decision-making strategies, and the overall scope and breadth of your company. The more an attorney understands you and your business, the more understanding will be present between the two of you. If you’re comfortable picking up the phone and calling your attorney, I’d say you’re in a great working relationship.
In Summary:
- A good attorney is critical to the success of your real estate business. He or she can coach you, assist you in a variety of legal matters, understand local judges and their rulings, and serve as a powerful resource as you navigate relationships with tenants.
- It’s important to find a good attorney before you need one. Ask titling companies or people you trust for attorney recommendations.
- When selecting an attorney, ask a series of questions to better understand his or her services and whether or not the partnership would be a good fit.
- Be open and honest with your attorney for the best working relationship. His or her wisdom and experience will be critical in your business’s wellbeing.