The commercial and residential real estate landscape has changed significantly in the wake of the pandemic and resulting economic closures and disruptions. Remote work is here to stay, bringing significant shifts in buyer preferences for home features and locations. Increasing real estate activity, combined with evolving regulations and processes, brings opportunities for real estate attorneys to serve clients in new ways.
The key to growing and thriving in real estate law is to stay on top of these changes and to leverage legal practice management tools in overseeing client activity, communications and cases. Here are some of the important changes happening in real estate law that may signal opportunity for your firm.
Regulatory changes in real estate
In response to rapid economic change and a turbulent real estate market, many states have adopted local laws and regulatory adjustments to address housing, planning, zoning, rental regulation and taxes. California alone adopted over 15 new laws and regulations related to real estate in early 2021. As homeowners, investors and businesses react to these changes, firms are responding with expert legal services.
A great reshuffling in residential real estate
The U.S. real estate market is beginning to show signs of a “great reshuffling,” as people relocate to homes with more privacy and space to ease working from home, the CEO of Zillow remarked. With remote work a given, workers are moving to be closer to family, to live in an optimal climate or to live in a home with features that support a work-from-home lifestyle.
The pandemic has also accelerated trends of people fleeing large, expensive U.S. cities. While home shopping is up everywhere, Zillow reports a “deceleration of migration” to cities and expects it to continue.
Rental assistance and eviction moratoriums
Nearly nine million households are reportedly behind on their rental payments, according to data from the Consumer Financial Protection Bureau. The bureau recently announced an interim rule stating that property owners using debt collectors and those engaging in eviction proceedings (including attorneys) who wrongfully evict tenants could face federal and state prosecution as well as private lawsuits by any individuals negatively impacted. The Centers for Disease Control and Prevention has extended the national ban on evictions through the end of June. At that point, courts are expecting eviction activity to more than double. In response, a number of states, counties and major cities have established various tenant protection programs. Legal aid organizations and attorneys versed in state and local protection programs and rental assistance programs will help homeowners and renters navigate the maze for some time to come.
While initial protections under the CARES Act have expired, the Biden administration has extended a foreclosure moratorium for federally guaranteed mortgages through June 30, 2021. When the moratorium ends, homeowners who are not in good standing in a forbearance program may face foreclosure, as loan servicers begin or resume the foreclosure process. There will be a bump in demand for real estate attorneys who focus on helping homeowners with loan modifications or avoiding foreclosure. A foreclosure lawyer can help borrowers understand their options, navigate the rules of the court, postpone a trustee sale or sue a lender. The process involves making a legal argument, filing documents with the court and following the rules of evidence.
Commercial real estate
Commercial real estate is facing distress in the near term. Federal Reserve data shows U.S. commercial property debt climbed to an all-time high, while vacancy rates continue to rise. The commercial market may be affected for years to come due to the pandemic and the ensuing tectonic shift in the way Americans work remotely.
Commercial retail has shifted significantly to e-commerce and away from on-site retail space. Required changes for social distancing, physical barriers, HVAC improvements and drive-through delivery will cause many owners of commercial retail properties to redevelop or repurpose their retail spaces.
Legal cases surrounding lease agreement disputes, commercial rent negotiations and contract reviews are expected to increase through 2021. Real estate attorneys are already working intensely with commercial parties in negotiating contract changes and helping clients understand and comply with constantly evolving government requirements. The volume of work will grow in the foreseeable future.
Signatures and document recording go digital
Purchase transactions, contracts and agreements are becoming more streamlined, thanks to digital technology. A traditional home sale—including the loan paperwork, title, tax and various other legal documents—generally totals around 200 pages, and many of those require signatures. In response to the pandemic and social distancing, many lenders and attorneys now accept electronic signatures.
Deeds and affidavits are used to change, add or remove names on real estate. Changes to the title (ownership record) of a property must be recorded with the county recorder where the real estate is located. Common reasons are the sale of the property, adding family members to the title to avoid probate, one spouse receiving the property in a divorce or the owners transferring the property into a trust.
When documents must be recorded, clerks’ offices would historically accept paper documents by mail or overnight courier service. The paper process can cause a delay of two or three days as staff manually handle the paper documents, followed by data entry to complete the recording.
Today, over half of deeds and affidavits are recorded digitally, using e-recording. A process of creating, managing and filing digital documents as official public information, e-recording allows the recording office to process documents in a fraction of the time that traditional paper requires. More than half of all jurisdictions in the U.S. now use e-recording processes.
Automation Helps Real Estate Attorneys Seize Opportunity
If there is a silver lining to the stressful changes occurring in the housing and commercial real estate markets, it may be the opportunity for innovation by real estate attorneys in increasing their firms’ productivity with automation-based legal practice management software.