How legal counsel can help real estate developers avoid costly delays

In the Pittsburgh market, residential and commercial real estate generally are both strong. That strength is relative to particular areas, with up-and-coming neighborhoods generating significant interest from developers, which is driving prices and values up.

While many developers are eager to seize this opportunity, it is a good idea to have someone with a legal background offering localized advice from the outset.

“Too often a legal agreement is signed before a lawyer sees it, only to discover later that it is ultimately unfavorable to the project,” says Kenneth J. Yarsky II, Esquire, Shareholder and Director, Chair of the Real Estate Services Group of Sherrard, German & Kelly, P.C.

Smart Business spoke with Yarsky about how developers can best navigate the approval process to get their projects done.

What legal issues do developers need to know regarding zoning approvals in commercial and residential deals?

Developers need to do their homework and understand local approval processes. For example, it is imperative to become familiar with the relevant ordinances adopted by each municipality in which a developer may venture. Each municipality has its own set of land development and subdivision ordinances setting forth the rules and requirements that must be followed.

Developers interested in buying property, knowing they have particular needs, must make sure the type of development they have in mind is permitted to be developed where the development is proposed. Municipalities often have a lengthy approval process, which would dictate the requisite due diligence period in an agreement. Part of that routine is knowing the ordinances that apply to development and the zoning for the proposed site. Developers will need to work with local officials to determine what, if any, variances may be needed, if conditional use permits are required, what special exceptions, if any, exist and whether there will be a need to rewrite existing zoning ordinances to get the development off the ground. All of those require specific and different skill sets, provided through design and planning and legal professionals.

Sorting these points out also takes time and each stage has its own deadlines. Miss a meeting and the project can get pushed back a month. There may also be several public meetings to attend, and planning commissions, boards of supervisors and city council members to engage.

When in the development process should legal counsel be engaged?

It is sometimes the case that planners, architects and engineers decide lawyers are not needed though the approval process. But legal counsel is an important part of the team. Lawyers can ensure all steps are on the record so, if there is a hang up, an argument is ready to be presented in court. It must be kept in mind that the record is created before the local governing body and not the courts.

It is imperative to bring a legal adviser to the table in the beginning. As soon as there is serious interest in a piece of property, the development team, including legal counsel, needs to be assembled and put in place. Though there are standard agreement of sale forms provided by realtors’ associations, it is preferable to have the more sophisticated transaction documented by a skilled lawyer.

It may also make sense to have a legal team with members that have separate responsibilities — someone who knows the transactional aspect alongside others who know the governmental processes needed to secure approvals and those experienced with the review process, as well as those with drafting abilities and negotiating skills associated with the design and construction phase of the project. They should be working with the design team, architects and engineers to identify hurdles that might be encountered on the way to get approvals, so the project can take shape with the minimum of legal obstacles.

Before undertaking a real estate development project, legal counsel should be engaged early in the process, not later. It is better to have someone with knowledge of the law and approval processes watching over the project so there are no costly hang-ups that can harm or derail an otherwise tremendous project.

Insights Legal Affairs is brought to you by Sherrard, German & Kelly, P.C.