Many lawyers would agree that practicing residential real estate is not the intellectual pinnacle of the legal profession. The argument goes that it is simple to do, the steps are repetitive, and it is properly the realm of law clerks, supervised (in theory) by qualified lawyers. Also, it has become a commodity, and clients are fee sensitive. Simply put, it is difficult to get rich doing it, unless you can use clerks and support staff to process transactions in great volume, with experienced lawyers spending the minimum possible time on each matter.
There is some truth in this commonly held view, although it is also true that doing residential real estate well is more challenging. The problem, of course, is that clients cannot easily distinguish between those lawyers who do it to the highest professional standards and those who do not, so they often choose their counsel based on price. As a result, fees have been suppressed for many years.
The result is that those lawyers who have the knowledge, experience, ability, and interest to practice residential real estate properly are under a great deal of pressure to spend the minimum possible time on each transaction. And so, the better lawyers often move on to do the type of work which will reward them for the time that they must put in to do the job properly.
There is much more that can be said about the challenges of practicing residential real estate, but I will leave that to others who actually know something about it. My interest is in commenting on the sheer lunacy of misguided young lawyers starting their practice in this area of the law. Before my rant gets to fever pitch, I will first exclude from my incredulity those young lawyers who start in residential real estate because they want to make a career in real estate law and see it as a stepping- stone to a career in commercial real estate or a related field. That might make a modicum of sense.
No, my wrath is reserved for the young lawyers who I have met who want to practice in a completely unrelated field of law, but have somehow decided that to help them pay the rent until they can develop a client base in their chosen field, they will take on some residential real estate files to generate cash flow. They typically argue that:
1. it is simple work that they can learn quickly;
2. they can get some friendly real estate brokers to refer them some files if they charge a few hundred dollars less than the competition (and even more if they break the ethical rules and pay referral fees); and
3. (my personal favourite), they can hire a freelance clerk who already knows how to do this type of work who, in some cases, will even bring the clients. All they have to do is sign-off on the files and cash the cheques.
In Part II, I will tell you why, to slightly misquote Fagin in the musical, Oliver, “I think that they should think it out again.”
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc