5 things to consider before hiring a syndication law firm
If you’re in real estate syndication, you need to hire a syndication law firm to help you protect your interests. In real estate, syndication involves investors pooling finances and investing in real estate. Syndication allows small investors to collaborate and invest in large development projects like commercial buildings, apartment blocks, and land development.
But real estate syndications aren’t as easy as they sound. They involve complex processes like structuring investments, determining compensation structures, and assessing tax and legal obligations.
Federal and state laws view real estate syndication as securities. This means compliance with securities regulations is a must if you invest in syndicated real estate. Syndication law firms offer services that make investing in syndicated real estate more accessible for investors. Browse here to learn more about deal structuring, providing legal advice, and drafting legal documents.
If you’re looking to invest in syndicated real estate and need a syndication law firm to work with, here are five things you need to consider before hiring one:
- Syndicating experience
The first thing you need to consider before hiring a syndication law firm is its experience in handling real estate syndication cases. You can tell how much experience a law firm has by asking how many securities offerings the partners have written or handled during consultation.
Consider the practical experience of individual partners. Find out whether they have experience working as syndicators, real estate brokers, and investors. Your real estate investment would be safer if you worked with a law firm with partners that have practically invested in real estate or issued securities offerings.
Law firms that have solid experience have a rich history of handling large numbers of securities offerings or helping clients raise significant amounts in different states.
- Educating syndicators
Before hiring a syndication law firm, you need to consider whether it educates syndicators on securities laws and rules for raising private funds. Syndication law firms can use articles, guidance, educational workshops, and videos to educate investors and enable them to make better decisions.
Educating syndicators about security laws matters because the law considers syndicated real estate. Companies that syndicate properties must be established as Limited Liability Corporations, which sell shares in the form of security to potential investors. This means that they must comply with the Securities and Exchange Commission (SEC) regulations.
A good syndication law firm should help syndicators understand these regulations and securities laws in the state where they plan to invest. This keeps them from getting into compliance problems that could lead to criminal or civil liability.
- Insurance coverage for malpractice
Before hiring a syndication law firm, check whether it provides malpractice insurance coverage for corporate securities. Most law firms avoid this kind of coverage because of the high premiums it attracts in the industry. Hiring a syndication firm that provides coverage against malpractice is a great way to safeguard your syndicated real estate investment against losses.
- Legal fees
The amount that a law firm charges for legal services is an essential factor to consider when hiring a syndication law firm. Some firms may give a low rate in the beginning. But the amount quoted may not take care of all the services you need, and you may pay additional fees.
On the other hand, some syndication law firms may quote a lumpsum amount that covers a wide range of services. Pay attention to the services that legal fees law firms quote cover. Credible law firms don’t charge supplemental fees; their legal prices include the cost of filing state and federal notices.
Private placement memorandum document with pen on wooden desk in office
They also outline all the services covered in their legal fees and inform clients about costs for additional tasks upfront.
- Average time for completing syndication documents
Consider how long a law firm takes to complete syndication documents before hiring its services. This duration may be determined by how fast you review the documents sent to you.
However, efficient law firms take about a month to complete syndication documents for your offerings. Avoid law firms that require months to get the syndication documents ready, as that could mean waiting longer before you get regulatory approval for your SEC filing.
Final thoughts
Real estate syndication offers numerous benefits to investors, including combining their connections, expertise, and experience to make sound investments. However, syndicated real estate can be complex to handle.
This is why you need to work with a syndication law firm to handle securities’ legal issues. Considering the five things discussed above before hiring a syndication law firm ensures that you get the right advice and the services you need to succeed in your investment.
