Article - Chambers Student Guide

Property/real estate

In a nutshell

Property lawyers, like their corporate law colleagues, are essentially transactional lawyers; the only real difference is that real estate deals require an extra layer of specialist legal and procedural knowledge and there aren’t quite so many pesky regulatory authorities. The work centres on buildings and land of all types, and even the most oblique legal concepts have a bricks-and-mortar or human basis to them. It is common for lawyers to develop a specialism within this field, such as residential conveyancing, mortgage lending and property finance, social housing, or the leisure and hotels sector. Most firms have a property department, and the larger the department the more likely the lawyers are to specialise. Note: ‘property’ and ‘real estate’ are entirely interchangeable terms.

What lawyers do

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Negotiate sales, purchases and leases of land and buildings, and advise on the structure of deals. Record the terms of an agreement in legal documents.
Gather and analyse factual information about properties from the owners, surveyors, local authorities and the Land Registry.
Prepare reports for buyers and anyone lending money.
Manage the transfer of money and the handover of properties to new owners or occupiers.
Take the appropriate steps to register new owners and protect the interests of lenders or investors.
Advise clients on their responsibilities in leasehold relationships, and how to take action if problems arise.
Help developers get all the necessary permissions to build, alter or change the permitted use of properties.

The realities of the job

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Property lawyers have to multi-task. A single deal could involve many hundreds of properties and your caseload could contain scores of files, all at different stages in the process. You’ll have to keep organised.
Good drafting skills require attention to detail and careful thought. Plus you need to keep up to date with industry trends and standards.
Some clients get antsy; you have to be able to explain legal problems in lay terms.
Despite some site visits, this is mainly a desk job with a lot of time spent on the phone to other solicitors, estate agents, civil servants and consultants.
Most instances of solicitor negligence occur in this area of practice. There is so much that can go wrong.
Your days will be busy, but generally the hours are more sociable and predictable.

Current issues

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Arguably the most obviously cyclical legal area around, property practice will always and has always followed the market. In a down economy there’s less demand for properties and new developments, values plummet and conventional bank lending becomes increasingly hard to find. Yes, the recession has hit the property sector hard, but this is nothing new. When the economy picks back up, so will this practice area.
The first half of 2011 saw property markets grow globally. This was most notable in emerging markets, which are expected to grow much faster than developed markets. There was improvement in Europe as well, but the economic uncertainty makes it more difficult to predict how this will develop.
Generally, banks haven’t been lending as much or as often. Lenders are demanding low-risk lending criteria, and borrowers are being forced to raise greater amounts of capital. It’s been the cash-rich investors from foreign sovereign wealth funds (particularly Qatar) and big foreign companies (often German) who have been investing into the UK market. However, they’ve been actively and aggressively pursuing primary investment assets – the big office buildings, shopping centres and tower blocks, meaning that, at that level, there is a high demand and a low supply, keeping prices pretty high. The demand for secondary assets remains lower.
There has been a shift towards refinancing of existing deals in the wake of the general downturn in new transactions, with landlords having to be much more flexible than in previous years. Landlords are keen to avoid the dreaded ‘empty rates’ scenario, where they are forced to pay for buildings without occupiers.
Apart from big projects like the Olympic Village and Crossrail, the public sector real estate market has slowed. Particularly significant are the cuts to the social housing budget. Firms with existing experience in these sectors largely have the market sewn up; however there are fears over a drier period ahead.
The recession caused the real estate transactional market to implode, with some parties who had signed deals, especially buyers, examining/challenging purchase contracts and trying to pull out of deals. This triggered an increased in litigation and firms experienced an upturn in contentious work.
Generally, property litigation is a booming area at the moment, even though matters are not necessarily going all the way to court due to cost implications. Many cash-strapped landlords and tenants are settling pre-court, or going to mediation.
The slow economy means more insolvency, with the knock-on result that some former tenants are being pursued when their assignees default. There are also more break clause disputes. The volume of general landlord and tenant and dilapidations work is also up, with landlords looking for somebody to blame, they are picking over every last detail.
The trends in property finance have included a large number of loans being renegotiated, development finance thinner on the ground, increased fire sales, pre-syndication of new debt and anxiety that UK Real Estate Investment Trusts (REITs) may breach their financial covenants. Banks are beginning to lend again, and the market is now more receptive to new deals, although these are tightly controlled and generally at a much lower level than before. Deals under £100m are no longer considered small.
German banks are a major presence, while Shari’a finance remains a small but significant area.