Government Hurdles, Parking Lot Dealmaking, Pent-Up Energy

Ed. note: This is the first in a series on the changing practice of law in varied areas. 

In pre-COVID times, commercial real estate attorney Brian Lewis could walk a subdivision plat down to the municipal office and see it processed on the same day.

“You could do it in an afternoon,” said Lewis, who is chair of the real estate, development and finance group at Ryan, Swanson & Cleveland, PLLC, in Seattle. “You could write your check and walk out with a recorded plat. It could take about four hours.”

Those days are over.

“Now, you have to take it down, drop it off, and wait. And the subdivision doesn’t exist until that’s done. You can’t do anything else. You’re just at the mercy of the process.”

Although Lewis’s firm records electronically whenever possible, this isn’t an option for plats. “The turnaround is a couple of weeks,” Lewis said. “Not that bad, but slower.”

Commercial real estate practitioners like Lewis are at the mercy of many things in the new pandemic reality — from recording and permitting hurdles to the continued suffering of retail businesses and the landlords who serve them.

Numerous developments have forced these lawyers to adapt, but after an initial shock, they have also largely adjusted their day-to-day to a new normal. 

“Uncharted Territory”

John A. Goldstein, who counsels and advises clients on commercial real estate and finance transactions nationwide from the Chicago office of Greensfelder Hemker & Gale, P.C., described an experience similar to Lewis — being at the mercy of government offices whose personnel have shifted to working at home.

“We’re using virtual notaries and also dealing with much slower-than-usual recording of documents, so the companies have to come up with more assurances for title companies that there’s not a lien.”

Recording is not the only government interaction that takes longer, of course.  When building code and occupancy permits are delayed, Goldstein said, this can create a domino effect. If a landlord can’t finish a build-out, that landlord can’t collect rent and might not be able to pay the lender.

“Government agencies are trying to come up with things to help, but this is uncharted territory in every respect,” he said. “We’ve never encountered something like this.”

“Everything is virtual,” said Alan Nochumson, the founder of Nochumson, P.C., a four-attorney real estate firm in Philadelphia. “The Zoning Board of Adjustment is all virtual. For a short time period we couldn’t file a thing, but then the city made adjustments.”

A new online product allowed practitioners to file, but nonetheless, the process for obtaining approvals and variances can be difficult.

“A lot of times you need a warm body to talk to,” Nochumson said. “Sometimes, that was hard. For every 10 emails I sent, I’d get one response.”

Despite delays, Nochumson reported that his firm is busy and his real estate developer clients are busy. He suspects it is pent-up energy because, early in the pandemic, no deals were happening at all. Recently, he helped a bar get zoning as well as obtained a variance for a pizza shop. Businesses are anticipating a return to normal activity.

In the early days, Nochumson grew concerned because a big part of his practice involves zoning board hearings.

Before things started to move again, “I did a lot of marketing and informing my clients what was going on in government and telling them what they needed to do related to that,” Nochumson said. “I told my clients, ‘You’ve got to prepare.’” 

Many took his advice and were ready to proceed when restrictions eased.

“During those first two to three months [of the pandemic] it was more about keeping people calm and informed,” he said.

“Business as Usual”

Recording and permitting processes are not the only things that gobble time. While Goldstein reported that purchases and sales of commercial real estate are still happening during the pandemic, the deals take longer to close because nothing happens in-person. Everything is by email. In some instances, closings have been conducted in cars in parking lots.

“These kinds of things were unheard of before,” Goldstein said.

Nevertheless, Goldstein’s practice has been consistent. New types of deals have poured in to fill gaps, and he’s been pleased with the technology that allows for remote work.

“After the initial shock, it became a day-to-day thing,” he said. “It was business as usual.”

Working at home does come with its wrinkles. Goldstein said that in the old days his firm used to conduct lunch meetings to discuss clients or marketing or perform administrative work.

“Now, those working remotely don’t want lunch meetings — they have to feed their kids.”

Lewis described similar changes to his practice. The number one difference in these pandemic times, he said, is that he hasn’t met with a client in-person for nearly a year. Instead, he’s used emails, phone calls, and Zoom meetings.

“There hasn’t been less communication, it’s just not in-person,” he said. “I used to meet with clients every three months or so.”

Along with meetings, notarization has gone remote. The state of Washington passed emergency legislation to authorize virtual notaries, and firms had to purchase a certain kind of software.

While Lewis has not used it himself, his colleagues report that the system requires multiple verifications. The state’s complex notary law — for example, any lease longer than a year must be notarized — doesn’t make it any easier.

“Our firm has found this pretty difficult to manage,” he said.

All in all, though, the commercial real estate market in the Seattle region has held its own. “We were riding a pretty strong wave going into this,” Lewis said. “A lot of people thought we were due for some kind of correction anyway.”

The pandemic may have accelerated this correction from an overheated market in office-space leasing and many construction projects — as evidenced by the numerous cranes that dotted the famous Seattle skyline — but Lewis has not seen a big uptick in bankruptcy.

 “It was running pretty hot before this hit,” Lewis said, “and this really hasn’t caused it to tank.”