During a term of Real Estate Document Drafting (Law 6930), which is a drafting seminar, we discuss substantive and procedural topics pertaining to a real estate law practice. Certainly we talk about the structural and functional elements of residential and commercial leases, transactional and financing letters of intent (a/k/a term sheets and commitment letters), purchase-and-sale agreements, deeds, promissory notes, mortgages (both first-position and subordinate), and assignments, and declarations (such as for condominiums, owner associations, cooperatives), as well as other “daily use” topics such as easements, licenses, and Uniform Commercial Code Article 9 instruments. As we go through the “storylines” of those documents we discuss negotiating parameters inside the documents which the counter-parties and their attorneys engage as they move to executable versions and closings. And we do this because that core “portfolio” forms a basic grouping of the documents Students will negotiate, draft, and review as practicing lawyers.
In addition, we also regularly consider transactional knowledge, skills, and abilities outside the documents which new real estate lawyers will need to develop for the benefit of their Clients, law practices, and overall career-paths. Examples we discuss include:
- Title insurance – The reality of a real estate law practice is that title insurance forms a “driver” propelling many transactions from contract to closing. Students need to acquire an understanding of the use of title insurance, its predicate title commitments, binders, or abstracts, and the functions of Schedule A (insured parties, coverage limits, legal description, and other transactional elements), Schedule B-I (predicates to policy issuance), Schedule B-II (exceptions to coverage, many of which can be cleared through the “mark-down” process), and policy endorsements.
- Due diligence – Real estate lawyers are often be called upon by Clients, and the underlying contracts or title commitments, to research their counter-parties (proper organization and maintenance under state law, actual authority to contractually bind the party and to execute documents, tax status, litigation status) and the subject-property (prior conveyances, existing encumbrances and restrictions of-record affecting the land). Those matters can often be addressed by publicly available research through local clerks of court (or other official public records repositories), property appraisers, property tax collectors, and UCC websites and hardcopy sources. Further, research is necessary into the suitability of a subject-property for a Client’s intended use (location, legal access, zoning, surrounding properties and neighborhoods, physical and wood destroying organism inspections, seller disclosures) and the environmental condition of the subject-property (Phase I and II studies, flood zones, wetlands). Even if a real estate lawyer does not directly attend to those due diligence activities, the lawyer may coordinate the systematic conduct of those activities by third-party engineers and other vendors and review the results with the end-user Client.
- Surveys – Real estate lawyers must have a firm working knowledge of the boundary and topographic parameters of the properties which are the subjects of transactions. This is important to support both the title review and due diligence processes. Students should understand the different approaches to legal descriptions which appear graphically on surveys, such as metes-and-bounds (through distance/angle/curvature “calls” and even old school “chain” measures) and plat systems. Other items which can appear on surveys must also be considered, including easements, rights-of-way, and encroachments (on and off a subject-property), all of which can impact a seller’s, buyer’s, and lender’s rights in land.
- Marketable Record Title Act – While “MRTA” title claim issues do not often arise, occasionally it is necessary to determine the “root title” to a property. The measures to research and possibly extinguish this sort of issue are highly technical, but it is beneficial for a Student to know they should learn to do so.
- Quality control – Transactional lawyers (not just real estate lawyers) try the best they can to “craft and draft” deals that do not end up in litigation. This effort is highlighted in real estate transactions due to the layers of title and legal description matters which can arise. To enhance quality control and risk-management, Students should be encouraged to routinely implement at least the following three practical measures, even after they have departed the Law School and entered their practices: (1) obtain and use a ruler for proofreading their work-product; (2) conduct word-by-word “read backs” of specificity-dependent document provisions like legal descriptions; and (3) give drafts of core and complex transaction documents to disinterested colleagues to do “clean reads” prior to circulating the documents.
As a final “mindset” matter, transactional Students should be encouraged to develop a checklist process for creating and reviewing documents and calendaring critical transactional events. (One resource to which they are pointed is The Checklist Manifesto by Atul Gawande. This proactive mindset can serve to avoid forgotten or otherwise missed or dropped substantive and procedural matters during the lifecycle of a transaction.