Real estate lawyers lifting their heads from the paperwork strewn over their desks and their bulging in-boxes will discern a couple of trends – more and more documents used by real estate lawyers as tools of the trade are becoming standardised and clients are expecting their lawyers to be more constructive, more cooperative and more commercial. All real estate lawyers will welcome these trends, but the most aspirational ones will want to play their own part in taking them forward.
Royal Institution of Chartered Surveyors’ Common Auction Conditions
The latest example of a standardisation project is last month’s publication of a new edition of the Royal Institution of Chartered Surveyors’ (RICS) Common Auction Conditions. The RICS brought leading law firms and auction houses together to give the conditions the polish they needed to maintain their position as an industry standard, governing everything that goes on in the auction process. More materials are promised by the RICS team, including guidance on how to make best use of the conditions and a form of appointment of an auctioneer, which dovetails with the conditions.
The British Property Federation form of lease
The British Property Federation (BPF) has long played a leading role in the real estate industry. While it champions the rights of real estate investors, it realises that investors have to do deals with occupiers, so it is in constant dialogue with other industry groups. Look at what happened in April. The stultifying effect of the combination of over-rented premises and restrictive alienation clauses had been graphically illustrated in Allied Dunbar v Homebase. Thanks to the team that the BPF pulled together, there are now deals instead of the legal equivalent of trench warfare – deals that provide liquidity, an elixir for the industry. It was heartening to read about Michael Wemms of the British Retail Consortium’s speech at the BPF’s annual lunch a couple of weeks ago. Partnership and practicality were the watchwords. Hear, hear!
Some lawyers are rather snooty about published forms of lease, but leading institutions get solid deals done on many lettings by using the BPF form of lease. These include deals involving rents of up to £500,000 per year. For smaller, simpler lettings, why not use the Law Society’s standard form of lease and get the rent flowing quickly. If you are still not convinced, ask how the boom in serviced office lettings would have occurred had prospective users been faced with an 80-page business lease.
The Commercial Property Standard Enquiries
The Commercial Property Standard Enquiries (CPSE) have really helped real estate lawyers with due diligence. How messy this used to be when each firm maintained its own enquiries, with many showing off amazingly obscure points that were, in reality, already covered by general questions. The CPSE is the result of a lot of hard and cooperative work by professional support lawyers. The guidance notes to the CPSE are a first-class explanation of the law behind the acquisition process and should be key reading for real estate lawyers at all levels.
Standard Commercial Property Conditions
The Property Standardisation Group (PSG) in Scotland won an Innovation in Legal Services Award this year for its excellent work on the documents routinely used in deals north of the border. Professional support lawyers have again played a key and cooperative role in the PSG.
Standard sale terms were first published with a view to opening up the housing market. The Standard Commercial Property Conditions, now in their second edition, really do form a sound and fair basis for the sale and purchase of commercial real estate. We should embrace them and not routinely insert terms such as “”in Standard Condition 4(1)(b) the word ‘not’ when it appears the second time shall be read as ‘now'””.
Certificate on title
No one could say that the City of London Law Society’s certificate on title is gripping reading. It is, however, a genuine industry standard. It is comprehensive and, despite its title, is used throughout the UK. Members of the society struck an early and decisive blow for standardisation when the first edition of it was published in 1994. A sixth edition is likely to be released at the end of the year. What the industry needs now is for all real estate lawyers using it to stick to certifying matters rather than merely reciting them. The society continues to be involved in a number of other standardisation projects. Its report on title is in its second edition. It has published standard clauses dealing with uninsured risks and has projects in relation to a standard rent deposit deed and a standard form of opinion from a foreign lawyer in relation to its foreign client for use where that client is about to embark on a real estate deal in England or Wales.
Commonhold has had its detractors, but it is a heavyweight standardisation project and has caught the imagination of those members of the public scarred by landlord and tenant disputes relating to their homes. Variations from set documents, such as the memorandum and articles of a commonhold association and a commonhold community statement, have to be clearly displayed. Congratulations to the lenders for getting together and giving their approval in May to commonhold and the standardised documentation involved.
The point about standardisation and cooperation is not just to make life easier for law firms, it is that they oil the wheels of deals and time is literally money. Real estate lawyers now involved in regeneration projects and indirect investment schemes can brush away out-dated jibes about keeping a set of crayons for the all-important task of colouring plans. But just like any other business, off-balance sheet, offshore, tax-driven investment structures need to acquire and deal with their product – real estate.
Real estate law is as much about recurring assignments being handled smoothly and economically as it ever was. That is why standardisation and cooperation is so important to the complex, vibrant and increasingly international industry that real estate is today. As I tell my colleagues in the US, a well-handled real estate deal is a lot more attractive than a title insurance policy bought at 1 per cent of the value.
David Taylor is head of real estate at DLA Piper Rudnick Gray Cary