Real Estate Attorney v. Securities Attorney: What’s the Difference?

If you are using other people’s money to buy real estate, you will need two different types of attorneys to help you get your deal to the closing table.

• A real estate attorney to help you with your purchase and sale agreement, to help with your loan documents and all things related to your lender, and to help you with all things related to the escrow and title company.
• A Securities attorney to help you set up your companies, structure your deal with investors, and help you comply with securities laws.

Both types of attorneys will have an important role in your transaction, and both of them will be providing documents that your lender will need before they will fund your loan.

Where should they be licensed?

Your real estate attorney should be licensed to practice law in the state where your property is located, as much of what they do is governed by state law. Your Securities attorney, however, typically operates under federal securities laws, so it doesn’t matter where they are licensed as they are able to help clients under federal law in any state.

When do I need to hire them?

When you get an accepted letter of intent, that’s what you should hire your real estate attorney. They can help you draft a purchase agreement with the appropriate terms related to your purchase of the property. Your real estate attorney will also assist with reviewing your loan documents and will help you gather all the documents needed by the seller, the lender and the title company to close your transaction.

Once you have a signed purchase agreement, you should hire your Securities attorney to help you structure your deal and draft the appropriate offering documents.

What does a Securities attorney do?

Your Securities attorney will provide an organization chart for your lender’s approval, showing the legal entities you will use to take title to the property and the members of your management team. It is important to get them involved at this stage as there are nuances in the way you structure your offerings that will ensure that only the appropriate people get underwritten and sign the loan documents. Setting this up wrong can cause you, other members of your management team, and your investors a lot of extra work and hassle. Once your lender has approved the organizational chart, your Securities attorney will start working on your Securities Offering Documents. This includes:

• Helping you select and understand the rules of your Securities exemption
• Forming your legal entities and drafting their operating agreements
• Drafting a Private Placement Memorandum (PPM disclosure document)
• Drafting a Subscription Agreement (for your investors to complete)
• Filing a Form D with the Securities and Exchange Commission and doing the appropriate “blue sky” filings required by the state securities agencies to comply with “blue sky” laws (i.e., state Securities laws).
• If any legal opinions are required, your Securities attorney can help you coordinate them with Delaware-licensed or corporate counsel.
• If corporate resolutions or closing certificates are required by your lender, your Securities attorney can help with those, too.

Unless your real estate attorney is also a corporate Securities attorney with the appropriate Securities malpractice insurance (very few are) and drafting Securities Offering Documents and PPMs is a routine part of their regular practice (ask how many offerings they have drafted in the past year), then they shouldn’t be drafting your PPM, structuring your offerings with investors or drafting your other Securities Offering documents. It is easy to fall into traps with investors and taxes that only an experienced Securities attorney can help you avoid. Our offering documents have evolved (and continue to do so) over 10 years of practice based on the real experiences of our syndication clients in hundreds of Securities offerings.

Bottom Line

Both types of attorneys are necessary to successfully closing a commercial real estate transaction, and letting them each play their respective roles will assist you in successfully getting your deal to the closing table. Your real estate attorney will help you get the loan closed and keep you from making costly mistakes with the seller. Your Securities attorney will help you comply with Securities laws, reduce your risk in dealing with investors, and help protect you and your investors from creating adverse tax consequences.

Having the right Securities attorney on your team can help you stay on track to a trouble-free, long-term syndication business.