Dan Holden, Director of HoldenCAPITAL Partners discusses how to choose a good property lawyer.
Starting out as a small developer means that by necessity, you need to rely on external consultants across an array of services. Most developers will utilise business or family connections or former colleagues in areas such as accounting, legal, town planning, architecture, costing and delivery.
Often the ‘operating’ side of the business and the choice of an accountant and lawyer don’t get quite the same level of consideration as those consultants who are actively engaged in the production of the end product.
Dan Holden from HoldenCAPITAL believes getting the right man for the job is important no matter what their level of input to the process might be. Often it’s far more important in terms of the overall success and profitability of the business than getting an individual deal established.
Having the right lawyer to help you structure your business, negotiate acquisitions and deal terms can be an invaluable resource but so often, Holden Capital find themselves having to assist a developer who is not getting that level of support and finds himself having to worry about the ramifications of a poorly considered land option, a joint venture agreement that leaves him at the mercy of his ‘partner’ or a construction agreement that threatens his profit.
One reason this happens is cost. Many small developers don’t see the immediate value in paying for more than a competent solicitor and fail to appreciate the value-add of a good property lawyer. They fail to realise that this is like any investment in their future, sometimes you might have to wait to realise the return on investment.
From HoldenCAPITAL's experience, a good property lawyer proves their worth when things get tough by the work they do early in a deal as well as in their contribution when the business is being established.
Now to be fair, the latter is often a retrofit as the business grows and the developer comes to appreciate the value-add and has the cash flow to fund it, but the cost when setting up a new deal is one that shouldn’t be scrimped on.
Equally, a good property lawyer is one who values his relationships and understands the importance of supporting a small operator with potential. By identifying a developer who is prepared to listen and be prepared to invest some time with them, they know that it will be repaid with interest as the business grows and they continue to add value.
A good way to create a relationship for a developer starting out is to try and identify a young lawyer with sound experience in a firm with good property credentials. Preferably the lawyer will be part a team that can deliver a range of experience to help out when required and they can then grow together.
As mentioned earlier, there is a cost and value relationship that applies when choosing any consultant. The trick is understanding how much expertise you will need and what you should pay for it. From time to time you will get it wrong but by doing your homework and talking to others you will find the right partner in most cases.
And remember, not all relationships last and if you outgrow them, don’t be afraid to change. At the end of the day, it's your business and you need to make the tough decisions sometimes to stay on top things.
Finally, when you do find the right lawyer, remember to listen, you're paying for it.
In the podcast, HodenCAPITAL Finance Consultant Brett Cottam talks with Brad Marland from Gadens Lawyers where they discuss disruptions to the development industry and the current state of the market from a legal perspective.