Buying an Investment Property? When should you engage a lawyer in the process?
When considering engaging a lawyer when purchasing an investment property the earlier in the process that the lawyer is retained the better.
Ideally, the lawyer should be engaged before the Agreement of Purchase and Sale is signed. For large and sophisticated purchases, investors may want to consider having their lawyer draft the Agreement of Purchase and Sale rather than their real estate agent. This is not to suggest that a real estate agent should not be engaged.
In fact a real estate agent is a necessary tool and buffer in high priced negotiations. Having said that, for the purchase of a hotel for example, where a business and real estate is being purchased, the Agreement of Purchase and Sale will potentially need to address, among other items, labour law issues, insurance issues, and on-going construction matters.
Moreover a comprehensive due diligence clause will need to be included. Standard clauses used for the purchase of smaller investor properties may simply not suffice.
The cost of retaining the lawyer early in the process should be off-set by the benefits of having the lawyer involved early on in the process. Better a well drafted Agreement of Purchase of Sale, that adequately protects the investor than a poorly drafted Agreement of Purchase and Sale that leaves the investor exposed to a bad deal or a deal that does not get completed.
To reiterate, this is not to discount the importance of a good real estate agent representing the investor throughout the process.
In fact, the team of a lawyer and a real estate agent on the investors side will provide additional strength to the investor during the negotiation phase and shows a higher degree of commitment and seriousness to the vendor. Why otherwise engage a lawyer if the buyer is not serious? The real estate investor should engage the lawyer early in the process and have the lawyer as part of the investor’s team during the negotiations.
Another benefit of this strategy is that the lawyer can be put on retainer throughout the ownership of the investment and will be knowledgeable about the asset from the outset.
Geoff Malisa, a registered real estate broker and Co-Founder of Astor Nobel Inc., a real estate asset management company interviewed for this article notes.
“In my opinion investment real estate transactions run more smoothly when a lawyer is brought onto the file from the outset. The earlier the better.”
David Rose is a Toronto lawyer, a Registered Real Estate Broker and a Co-Founder of Astor Nobel Inc., a real estate asset management company.
This Blog is made available by Rose Law Firm for general informational and educational purposes only, not to provide specific legal advice. By using this Blog you understand that there is no attorney client relationship between you and Rose Law Firm or any individual contributor. You should consult a licensed professional attorney for individual advice regarding your own situation.