Bigger Is Seldom Better
The end of the year is the time of year when real estate attorneys are the busiest. We are trying to close multiple deals by year-end for our clients. With the closing rush comes the review and negotiation of stacks of documents. We work on contracts, leases, and loan documents. Over the years, most attorneys have become more efficient and have “trimmed the fat”, so to speak, from their form documents, making it much easier to get to the finish line, particularly at the busy time of the year.
However, not all documents are created equal. Some documents remain as thick as an unabridged dictionary. When I receive such a document today, I have to ask myself, why? What is it about this particular deal that makes the attorney on the other side think that it is necessary to prepare a document that is two, three, or even four times as long as the usual document for similar transactions? Is it the size or value of the deal? Is it the size of the property?
Sometimes, there are complexities involved. For example, a multi-property, multi-party transaction could involve cross-development, joint venture and cross-easements with funding from multiple sources. But even so, these issues can be broken up into multiple documents so as to not confuse the reader with one long document. Corporate and securities documents are notoriously long as are syndication documents. My partners in the corporate department delight in these documents.
But real estate contracts, leases, development documents, and loan documents don’t have to equal their corporate cousins to be effective. As I prepare for one of my year-end closings, I have been negotiating a loan that has included a 40 plus page mortgage and a 120 plus page loan agreement (plus exhibits). My first read through of the loan agreement took four days. Is the lender better protected than if it had sent a fifteen page mortgage and a 25 page loan agreement? No. Could everything have been covered in shorter documents? Absolutely. While the lender felt the need for the lengthy documents, and we had no choice but to review and negotiate, bigger only resulted in higher legal fees for everybody.