The property challenge
7 October 2002
3 March 2014
12 May 2014
1 September 2014
7 October 2013
13 February 2014
"How do we securitise the receivables? Where is the spreadsheet for the availability charge? Oh, and although it is not important, I assume the Title Report is okay?"
Have we all metamorphosed overnight in some Kafkaesque fashion into corporate and capital markets lawyers? Certainly real estate (and certainly not property or, God forbid, conveyancing) lawyers can now order pizzas at 2am with the best of them. It is a given fact that the modern real estate lawyer must have a skill base way beyond the traditional land law and landlord and tenant core. In that group of elite firms dealing with the top end of the real estate market and with its major players as clients, the remit of the real estate lawyer now includes onshore and offshore corporate structuring, direct and indirect taxation, outsourcing, PFI and financing - from leveraged debt through to securitisation. Real estate lawyers are leading teams of partners and assistants from a multitude of disciplines and must have the broad grasp necessary to project-manage. The best lawyers not only deliver what the client wants, but add value by improving the transaction in terms of liquidity of product and taxation impact. They are, or should be, the consigliere of the real estate world.
In addition to the heady heights of corporate and tax law, there are a suite of skills closer to home that are particularly relevant to the large-scale urban regeneration schemes and green field developments that are shaping the UK's built environment. Schemes valued at hundreds of millions of pounds and which will take 10 or more years to complete do not begin and end with conveyancing. The client's aspirations in terms of timing and end product must dovetail with the ever-changing planning framework and its endless supply of acronyms - UDPs, SPGs, RDAs, etc. At the very least, a working knowledge of the strategic planning regime, compulsory purchase, public highways and building control are essential.
What about construction? We must understand in detail the obligations of the contractor and ensure that they mirror and match the obligations of the developer with no gaps. Environmental issues have caused less disturbance in the property market than we might have anticipated 10 years ago. Legislation does, however, affect everything we do - can you advise whether or not the polluter pays?
Real property and landlord and tenant law is, itself, the most complex of areas. Even today, development schemes in the City may be affected by the existence of profits à prendre and crown cautions. Out of town, you might wish to utilise a freehold rent charge to provide for orderly management of a £300m office park and, of course, case law continues to develop and change.
It is a wonder that modern real estate lawyers do not slip into error mode - of course we have to be IT literate so that our teams can utilise drop-down menu drafting - simply from the overload of law and practice.
The boundaries of property deals have also stretched and real estate lawyers will lead transactions as diverse as toll roads, railways, power stations and even the Millennium Dome - it is difficult to find a lawyer in London who does not claim to have had an involvement in that project. For those who have niche practices in specific areas such as energy or hotel-related real estate, specific areas of law and commercial practice must also be absorbed and assimilated into our advice and documentation.
Every lawyer now claims to understand their client's business, and nowhere is this more important than real estate. We must read the Estates Gazette, attend the British Property Federation Conference and align ourselves with our industry in representation to Government. There is absolutely no doubt that the mark of a truly excellent real estate lawyer is a real understanding of the real estate business. It is not enough to observe, we must participate in the business. All of the property industry organisations have representation from the legal community on their key committees - witness Stephen Fogel's recent appointment to head the Institute of Public Finance.
Like colleagues in other disciplines, we have to bring in the work, not just do it. The real estate industry in the UK is a very close-knit community. The major land-owning institutions and companies, the senior surveyors, architects and engineers and the same faces from the legal profession make up the usual suspects in each transaction. We must not only know the business, but also the players.
It was traditional in the 'West End days' for the lawyer to be a deal maker, to put together clients and contacts, to generate deals which in turn generate fees. Today, in the multinational cross-border universe, the same feel for a deal is necessary to spot synergies that may be deployed to the advantage of the client.
What about the competition? Not many years ago at a meeting of senior real estate lawyers one colleague from a major City practice said: "I don't compete against you guys, we're all there to do the deal, my competition is with my corporate department." Nothing has changed. Real estate practice has been under pressure in terms of fees for many years and we must find the deals and clients that enable us to be more than a necessary evil in the City practices of today. This means top quality resource management and a very clear strategic focus. As to direction of that strategy, one size does not fit all. Some firms will be comfortable servicing major clients with very large portfolios from the most routine of matters through to high value complex transactions. Others will find that concentrating on particular areas of practice is appropriate and in line with aspirations and profit requirements. What is doomed to failure is the real estate team that is doing the same thing this year as it was five years ago or even last year.
Real estate lawyers have always been a relatively collegiate lot. On the whole we are less adversarial than some of our colleagues in other areas of practice so I asked for some thoughts from the 'competition'. Clare Milton at Berwin Leighton Paisner says: "You have to have 150 per cent-90 per cent lawyering skills plus project management, client care, understanding of financial dynamics and value drivers and all the multi-dimensional specialist skills which make the new brand of deals happen"; Bob Kidby from Lovells says that you have to have "the ability to change and to reinvent yourself as the market itself changes"; Gary Watson of Ashurst Morris Crisp says that "a broad base of experience and skills" is important, he says it is "residential development today and motorways tomorrow"; Richard Forsdyke at Herbert Smith says: "You need a cosmopolitan outlook - there is a global market for real estate - and an ability to know what is important and what is pedantic."
Finally, a very personal perspective: whatever you do to earn a living should also be a source of enjoyment. I find that after 25 years in the business I have learnt to love, if not to understand, the multi-faceted world of real estate. From my work has grown a love and appreciation of historic and modern architecture. I find that I am interested in the way in which we behave as a society - this interest directly influenced by lectures on demographics and the changing market for office retail and leisure property. From City developments came a fascination for our ancient past and the way we lived which has grown into a passion for the history of London and a trusteeship of a new London museum.
10 or 20 years ago, property lawyers were instructed by their clients to buy and sell buildings, much of what we did was formula, almost painting by numbers. Today, there is a need not merely to paint the picture, but to be part of the team that makes the frame and stretches the canvas.
David Taylor is a senior consultant at Herbert Smith