- In this commercial real estate environment, its natural for disputes to frequently arise.
- The best way to avoid these disputes is to have good documents to rely on.
- And when you are in a dispute, bringing on an experienced litigator who can help you strategize is a must.
In the last few months, because of the current commercial real estate environment, I have written a few times about litigation. Things are a little dicey out there. I know I don’t have to tell you that. Well today we are going to dive in some more. And while we are already seeing a lot of disputes – much more than we did a few years ago – I reckon those numbers are going to continue to increase.
The bottom line is that, while deals are getting signed up, a lot of them are not closing. Much more than just a couple of years ago. And, sadly, with the increased interest rates and flat rents, investments are starting to fail. And will likely continue to do so.
As a result, there is no doubt that litigation has increased and will continue to do so. What to do, therefore, when faced with that unfortunate situation? Lets talk about it.
Ounce of Prevention is Worth a Pound of Cure
First, a good litigation defense starts with hiring a good lawyer early in the deal process – before litigation is even contemplated.
I know folks often will try to save money by using form purchase agreements with no review or drafting operating agreements themselves. This is a bad idea. Doing so sets you up to having a messy divorce when things go wrong.
To be clear, I’m not saying that the TAR or TREC forms are bad. They aren’t. But they are a lot better when your lawyer reviews them, makes sure the right boxes are checked, and adds some additional clauses to the agreement for your protection.
And I know this sounds self-serving. I am a lawyer telling you to hire a lawyer early in the process. But the reality is its good advice. And it will protect you in the long run. Because when things go sour, you want – you need – to have good documents to fall back on. Ones that will be clear in dictating the rights and responsibilities of all the parties. So please take my advice and hire a good lawyer when setting up your partnerships or purchasing a property.
Also Need a Lawyer When Things Go Wrong
Despite the best intentions and having good documents, sometimes things just break bad. Especially in the current commercial real estate environment. So what should you do then?
Once again, get a lawyer involved. There are many reasons that you want to get a good litigator involved early in the process. First, we have expertise in litigation. We have been through it a lot. We are not intimidated by the process. And we know what steps you should take to put yourself in the best position.
Also, a good litigator understands how expensive litigation is. And we will do all we can to avoid it. So sometimes bringing in a lawyer who can look at things differently can help the parties resolve their issues prior to litigation. We can do this through demand letters, discussions with the parties, potentially pre-litigation mediation. All of these are possibilities for keeping costs down and yet coming to a resolution.
But if we cannot resolve the issues without resorting to filing suit, its important to get started quickly. The first step is to make sure you document everything. The more you have written down in any form – the better your records are – the better off your position will be in the litigation. A good litigator will also review your entire dispute and – with your input – form a litigation strategy that will put you in the best position for a recovery. Again, the sooner you do that and have a plan going forward, the better off you will be.
These are tough times in real estate. And tough times usually means there are going to be disputes between parties. When you are facing a dispute like this, please do not hesitate to reach out to a commercial litigator. Because we can help guide you through this difficult process to finding the best potential outcome.
