The Order of Things
From the attorney's perspective, there is a Zen-like quality to residential real estate transactions. When the vibrational activity of buying or selling an apartment advances to the point when an "accepted offer" is within reach, an attorney is usually contacted and a relationship created. Then the standard operating procedures kick in: deal sheet, due diligence, contract negotiation, loan application, commitment letter, Board package, Board approval or waiver, and the moment of truth, the closing. Yet, lurking within each component of the process, is the potential for havoc...particularly if one of the attorneys is unprepared or inexperienced.
Longing for the "Simple" Transaction
Long ago in a galaxy far, far away, there was something the brokers coveted--a so-called simple transaction. Those were the days were no one really took residential real estate transactions very seriously and attorneys just viewed the work as "bread and butter" deals that paid the rent. A form contract, a few pieces of paper from the bank, and boom, the deal was done. In today's world, with an aging housing stock, astronomical apartment prices, financially challenged co-ops and condos pervading the landscape and a variety of other trap doors, the path to closing often becomes a mine field that requires significant skill and experience to traverse. A misstep, and the deal can blow up.
Having had the recent experience of mentoring a young attorney from ground zero of real estate knowledge to significant skills, I was amazed by the quantity and complexity of the information that has to be imparted, digested and remembered in order to prepare someone to handle a "basic" real estate transaction. Co-op and condo transactions each have their own peculiar issues that must be addressed, day in and day out, to avoid the woe pile down the road. And the basics are often overlooked from deal to deal. Here are a few of my favorites foul ups:
--the purchaser is not reminded to submit his or her loan application within five business days after the fully-executed co-op contract is returned;
--the loan commitment period expires without a request for an extension of time;
--the attorney fails to track the timely submission of the Board package;
--the co-op lien search is not carefully reviewed;
--the seller's attorney fails to order the stock and lease from the pay off bank in a timely manner;
--the title report is not carefully reviewed and objections are not cleared in a timely manner;
--the seller's attorney fails to obtain the necessary documents to clear issues when an estate is the selling party;
--the seller's attorney fails to address the "FIRPTA" issues when the seller is a foreign citizen;
--the purchaser's attorney fails to obtain a "FIRPTA Certification" and it turns out that the seller is a foreign citizen;
--the seller's attorney fails to prepare the required tax form and calculate the payment when his or her client is a non-resident of New York;
--the seller's attorney fails to obtain UCC terminations for old lien filings that are still of record;
--a power of attorney has not been properly executed;
--an outstanding line of credit is not "frozen" by the seller prior to closing;
--the contract does not provide for the payment of a flip tax and a flip tax is payable;
--the contract fails to disclose an ongoing assessment;
--the contract fails to include or exclude personal property or fixtures;
--the significance of signing an "all cash" contract is not explained to the purchaser;
--the seller's attorney allows material representations to survive closing;
--and my personal favorite, when an attorney from another state is retained and does not understand the rules of engagement in New York City transactions.
Perusing the above, you get the picture. At any point, if a ball gets dropped, the process can grind to a standstill until the issue is medicated.
The League of Extraordinary Gentlemen (and Ladies)
In transactional real estate, most of the players are knowledgeable and pleasant to work with. There is a give and take between the attorneys, and at the end of the day, the contracts wind up with most of the same provisions and the parties slog through to the finish line. When one of the attorneys is phoning it in, literally or figuratively is unreachable, or just does not know what he or she is doing, inevitably, the other attorney picks up the slack in order to get things done. It's painful, rarely acknowledged, but it's what happens.
Residential Reality: Choose Your Counsel Carefully
Not all readers may agree that there's no such thing these days as a simple transaction. Nevertheless, it can get rough out there. Bear that in mind when you lawyer up...