Real Estate

In a nutshell


Real estate is a multifaceted legal discipline, explains Jon Mechanic, chairman of Fried Frank’s real estate group. It no longer simply involves the sale of property by A to B. Real estate now encompasses acquisitions and disposals, leasing, development and joint ventures.

A significant component of most transactions is the financing, which can involve sophisticated structuring, capital markets transactions, mortgage and mezzanine loans, debt restructurings, private placements, sale and leaseback financings, governmental incentives and tax aspects.

Another branch of real estate is land use, which requires attorneys to advise on state and local laws, such as zoning regulations, which affect the behavior and development of the real estate market. Lastly, there are aspects of real estate work that sometimes require advice on tax, litigation, restructuring and bankruptcy, and environmental law.

What real estate lawyers do


  • Draft a letter of intent, which sets forth the basic parameters of a transaction.
  • Conduct due diligence. Make sure what the client is purchasing or underwriting holds no unwelcome surprises.
  • Obtain municipal and/or state approval, where needed. Negotiate the contract, which allocates responsibilities among the parties.
  • Negotiate financing documentation.
  • Close the contract, joint venture and/or financing.

Realities of the job


  • Real estate is cyclical by nature. When the economy is bad, the real estate sector is often adversely affected.
  • Real estate lawyers get the chance to work with a variety of different people and personalities, meaning that people skills come at a premium. Clients include developers, owners, institutional investors, lenders, tenants, underwriters, pension funds, insurance companies, private equity and hedge funds.
  • Working in real estate requires sensitivity to each client’s needs and expectations. While private clients are motivated by profit margins, the public ones are driven by policy and politics. Lenders tend to be cautious in their approach, while developers are bold and visionary. Harmonizing parties’ competing goals can be tricky.
  • Real estate work involves a high degree of strategizing. High-profile projects can be complicated and involve lengthy and complex documents. Some will need to be drafted and redrafted many times.
  • Unlike corporate lawyers, who may have no more than a CD-ROM to mark the end of a deal, real estate lawyers have a physical result that can be seen, touched, visited, lived in and worked in.
  • Real estate lawyers tend to have a variety of projects in hand at any one time. This requires exceptional organizational skills.
  • As well as being a good all-around commercial lawyer, you need to be able to change gears quickly and have an interest in the real estate market.

Current issues


  • The recession made financing difficult to come by, causing many projects to be put on hold. The lack of capital left many owners and developers scrambling to try to obtain new financing to complete halted projects.
  • Many private individuals and businesses have been forced to foreclose mortgages. In other circumstances, borrowers’ loans are restructured.
  • Many opportunistic funds bought up distressed debt from banks and insurance companies, hoping to either restructure the debt or – in cases where the borrower defaults – gain ownership of the property.
  • The commercial real estate market is definitely improving, but still remains sluggish. It was the first sector hit by the recession and it looks like it will be the last to recover. While sales of single-family homes rose by 9.8 percent in 2011, US home values continued to shed around $681 billion in that year. Experts are speculating that the real estate market won't make a meaningful recovery until at least 2013.
  • Commercial property, on the other hand, is looking up. More lenders means better choice for borrowers, which means activity in the market is likely to increase. The US was reportedly second behind the UK in attracting cross-border investment in 2011. According to Real Capital Analytics, US commercial property deals are likely to climb by 50 percent in 2011, to a whopping $300 billion a year as loan maturities force asset sales and the economy continues to grow.
  • Investors – patiently waiting on the sidelines for the market to recover – are slowly beginning to sniff out new moneymaking opportunities.
  • However, many commercial borrowers are still struggling to repay mortgages and other loans. Lenders have the choice to foreclose or extend repayment deadlines. Too many delays, however, could lead to another collapse or slump in the market.
  • There is still a lot of litigation between lenders and borrowers, though this will decrease if and when the market improves.

What top real estate lawyers say


Jon Mechanic, partner and chairman of the real estate department, Fried Frank

“Students interested in New York real estate should read The Wall Street Journal’s Property Report on Wednesdays, Charles Bagli’s pieces in The New York Times, Steve Cuozzo’s column 'Realty Check' in The New York Post on Tuesdays and Lois Weiss’s column 'Between the Bricks' in The New York Post on Wednesdays.”

Stephen Lefkowitz, partner, Fried Frank

“Working as a real estate development lawyer is exciting and challenging. You get to help shape and follow a project from conception through execution, working with developers, architects, bankers and other real estate actors. And at the end of the process, there’s a concrete result that you can see and touch and feel proud to have been a part of.”