Times Are Changing in Real Estate Practice

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From LawHub, this is I Am The Law, a podcast where we talk with lawyers about their jobs to shed light on how they fit into the larger legal ecosystem. In this episode, Kimber Russell interviews a real estate lawyer who highlights the pluses and minuses of working for someone else instead of running your own firm.

Kimber Russell:

We're joined today by Dan Drake, a 1995 graduate from Stetson College of Law in Florida, who works on both real estate litigation and transactions for a small firm on the Gulf Coast of Florida. But Dan, you actually went to law school thinking you'd be a criminal prosecutor, so what sparked your interest in that?

Dan Drake:

Well, I was a police officer for 10 years in the city of St. Petersburg, Florida.

Kimber Russell:

What sort of cases did you cover when you were a police officer?

Dan Drake:

I worked patrol for a couple of years. I was an undercover detective in Vice and Narcotics for several years. I then was a field training officer where I trained new people fresh out of the academy, and then I went to what's called special operations, which is like undercover work except you make no contact with someone that you're trying to make an arrest on. It's more like surveillance. So I did that and was promoted to sergeant.

When I was younger, you feel indestructible. Nothing can happen to you and chasing people down dark alleys in the middle of the night is fun. But as you get older, you kind of realize, "This is kind of dangerous. This is maybe something I don't want to do all my life. I don't want to be chasing someone down an alley at midnight when I'm 40 years old." Coming out of law school, I had no interest in, let's say, being a criminal defense attorney. I believed that everyone I put in jail belonged to be there, and if I was going to be an attorney, I'd be carrying on the same thing that I was used to doing for 10 years. That was my idea.

Kimber Russell:

What was the first kind of job that you had once you had transitioned into law?

Dan Drake:

I would have liked to go to the state attorney's office and been a prosecutor. I think I would've enjoyed that. Unfortunately, at least in my neck of the woods, the starting pay for the state attorney's office and the defense attorney's office is on the low side, whereas some of the private law firms had bigger budgets to hire new people out of a law school. So while I was looking at going to work for the state attorney's office, I heard, actually through a friend, of a job at a particular law office and their starting pay was about $10,000 a year or more than the state attorney's.

I came out of school with substantial school loans to make it through, so getting a job offer at 10,000 more than another one that I was looking at, it was important. It did make a difference. Had I not had the school loans, I may have gone to the state attorney's route and tried my hand at prosecution. I think it would've, I might say, fit me and fit what I did for the last 10 years, but monetarily I had to take the one that offered the more money at the time.

Kimber Russell:

Let's fast-forward to where we're at today. So you're at a firm that does a little bit of everything, although you focus on real estate. You're also not an associate or a partner, but something akin to of council. What does that mean for your own particular compensation?

Dan Drake:

Well, I work at Lieser Skaff Alexander in Tampa. We actually do quite a bit of just about everything. For example, I'm very much into real estate, both litigation, transactional.

Kimber Russell:

So it sounds like you have something of an interesting organizational structure at your firm. What does that mean for your own particular compensation?

Dan Drake:

Without going in too deep, compensation is based on, essentially, two things. Number one is of course, how much money I can bring into the firm over a given year. We do bill by the hour, like most firms do, plus I get credit for cases that I bring into the firm, even if someone else works to them. I've been practicing law for 25 years and have made a lot of contacts with companies and people over the years, even at different law firms, and been able to bring things in. So if a case comes in that makes the firm some money, even though another attorney has handled it and has billed for it and has earned most of it, I get some credit for that for bringing it in. So my compensation is my hourly contribution plus my rainmaking contribution and there's a magic formula behind it that ends up to my annual compensation.

Kimber Russell:

It sounds like your rainmaking is pretty considerable. What is it about this particular structure at the firm that is preferable to going out on your own and taking full profits from your endeavors?

Dan Drake:

Well, I worked on my own for a while and there there's a lot to be said for doing that. It can be very satisfying, and you're right, you get a hundred percent of what you do. But you have to be a business person in addition to a lawyer, and I'll be the first one to admit, I'm not the best business person in the world. I'm just not. Lawyering, much better. To let someone else handle the bills and the banking and things like that, which can take a lot of time if you do that on your own, is actually quite a relief. I don't have to worry about insurance and how much and paying the rent and things like that. I do my job and I get my paycheck every two weeks and it's kind of nice.

Plus, I get exposure... Since we take on such a variety of cases, I can get some exposure to other areas of law that, you might say, I had some curiosity in, but not the expertise to handle. I could go to an attorney that's handling something unusual. I said, "Hey, tell me about your case and what's your strategy and what's the defense on this," and get the short version and learn something about it. I enjoy that.

And I tell you, it can be lonely being on your own as well. To have some other attorneys you can talk to and bounce things off of is great. It really is. To be able to walk down the hall and say, "Hey Mike, I want to do this and here's my plan. What do you think about it?" It's nice to have that second set of eyes, and sometimes a third set of eyes, on a problem to get a good legal outcome. When you're on your own, you don't really have that. You can call friends on the phone, but lawyers are busy. It's tough to pick up the phone and call someone and have them right there. It's just a little rougher to run things on your own. But I do know plenty of solo practitioners who would have it no other way. They tend to settle into specialties... Actually, we all tend to settle into specialties, or not necessarily one, but two or three, but they'll settle into specialties so that the need for outside assistance is reduced. But then again, they're in charge of their own rainmaking, their own bill paying.

Kimber Russell:

You had mentioned that when you were in law school, real estate wasn't something you were at all passionate about, but now it really comprises more of the focus of your practice.

Dan Drake:

When I was in law school, real estate was probably my least interesting subject. I had very little interest in it. Yet, when I got out into the working world and was exposed to some real estate transactions and some litigation, it just clicked. I found it interesting, I enjoyed it, so I pursued it. But had you asked me in law school, you would never have heard real estate come out of my mouth. So it was being out and being exposed to it that got me into it.

Kimber Russell:

Can you just give us sort of a generalized top level review of what your work entails, before we get into the nitty-gritty?

Dan Drake:

I will represent either buyers or sellers of residential real estate, commercial estate, which usually require custom contracts. We've got a client who is preparing to do a very, very large development in the area and we'll be handling several different real estate issues that are going to come up because it's going to be a mixed use property, so we'll be expected to be able to address those. Litigation wise, a lot of times we have a lot of clear up title on property, fights over title of property, use of property. "I've done this for 10 years on my property now they tell me it's illegal?" Most of my litigation has come from ownership arguments either arising out in the past or present. "This was promised to me and I think this is a false deed and I've seen false deeds," and it's straightening out things like that.

Kimber Russell:

How would you characterize the types of clients that you have for the most part? Are they big corporations, mid-size businesses, individuals?

Dan Drake:

We tend to represent a lot of big corporations and mid-size corporations. That's kind of the clients that we like to have. One of them has shopping centers and rental places all over Florida. That'd be our ideal client. But we've also had a grandmother come in who says, "I let this man I felt sorry for moving to my spare bedroom. Now he won't leave." So well, I'll get him out. Don't worry about it. We have some of those too. So it's really a variety.

But we do tend to focus on bigger businesses. It's nice to develop a relationship with a business that, let's say, rents property and they have property all over. What's nice is you can develop a relationship with one person that may be in charge of that, yet they'll have recurring problems and not just a one time customer. You may solve a problem for them today and two months from now they, they'll call you back and say, "Hey Dan, now got a problem over at this other location and here's going on." And what's nice is we already know how each other works and it makes the relationship a bit better. And so it's nice to establish those relationships with businesses and have central key figures. You get to learn what's expected of you, you learn how they like things, how best to serve them, who's in charge, who really makes decisions. So that's one of the reasons we try to focus on the companies. It makes operation a little bit easier than having a fresh face for every new case. But like I said, we do those two.

Kimber Russell:

Now you had alluded to, in your anecdote about the grandma with the tenant issue, eviction work. That tends to be counter cyclical and we know that the market for that was on fire in 2008 and 2009. How would you characterize the eviction real estate type practice right now?

Dan Drake:

Boy, you just lit a match there on a topic. I did, at one point in my career, focus primarily on doing eviction work. And in a way, it followed that business model that I just mentioned about a company with several different pieces of property. Most modern apartment communities, if you get to the ownership, you will find that they just don't own this one, they have six or seven other ones in the state of Florida, and three in Georgia, and on and on. They've got them.

If you do a good job for them at this one location, you could pick up their entire Florida portfolio and it becomes an ongoing stream of business, which is nice. Back in '08 and '09, times were different, and eviction work was good. And by the way, there still are, in Florida, some firms that just do evictions and that's fine. And they're tuned to it, they do it efficiently, they do it well, but they won't take much outside of that because you'll mess up their efficiency. They're set up to do it this way. I'm not going to drop some numbers on you, but you'd be surprised at how many evictions a firm can do in one 30-day period.

Kimber Russell:

You did mention the efficiencies. If you have a firm that is set up to take advantage of, say, efficiencies of scale. So can we get a micro view of that? If you're handling one eviction, what are the steps to that? What does that look like?

Dan Drake:

We can use eviction. And you're right, it doesn't necessarily have to be evictions. There are programs and models for other areas too, such as divorce, probate, asset protection. There are different companies that offer programs that help you make these things go smoother and quicker. The gentleman I worked with had, basically, a proprietary computer system, which would create all the documents. And, of course, in a standard eviction, it's usually because someone can't pay their rent. And if they can't pay their rent, they're usually not going to fight the eviction. So there'll be a petition filed for eviction in the local court and then a summons will come out to be served on the defendant.

Now, two upper hands we have in that part is a summons in Florida is usually 20 days to answer. In an eviction, you only have five days to answer. Also, in a lot of cases in Florida, to get it moving you have to have personal service. You've got to find the defendant and hand him or her the paper. It can be tough sometimes if someone wants to elude being served. Not in the eviction world. If you're not home on the first attempt, the process server has to wait at least six hours and go back and try a second attempt. And if there's no answer, the summons and complaint gets taped to your door and that's serviced by posting. That's valid.

This computer system's tracked when the service was done, and then every day would pop out a list of, "Who are we on the sixth day of?" And there was a person assigned to check the court files for whoever's on that list to see if they filed an answer and they're required to deposit the overdue rent. And if they didn't do one or the other or both, you pressed a certain button and the system would kick out a motion for default for either not answering or failing deposit rent or both. But when I say kick it out, it would go into a electronic queue. In fact, we haven't even touched paper yet. The only paper that has happened so far is the summons going on the door of the tenant. The complaint has been electronically created and filed and sent back to you, and then we forward that to the process server to serve and he or she prints out a copy to put on the person's door.

From there on out, it stays in electronic form. Your motions for default created electronically, transmitter to the court electronically. Judges are signing electronically. We then submit a writ of possession to the clerk who is directed to execute the writ of possession. That gets sent back to us electronically, and then it goes to the sheriff's office. Now, once again, it becomes paper at that point too, because the sheriff who finalizes the eviction has to have that writ of possession in hand. But the system that was set up handled so much of that, again, by just telling you who to track and press the right button on the right day and it would create the pleadings for you and you just make sure they got to the right place. So it became very easy to handle a great volume of the evictions. And, like I said, you'd be surprised at how many you could do in one month and it can be a lot. But you do have to be set up for scale to do that, and not many people do that.

Kimber Russell:

You had mentioned before that you do a lot of real estate closings. What does that look like in Florida in particular? Because I know that the law can be distinct between different jurisdictions.

Dan Drake:

It is. And I've got to tell you, the version of closing has changed so much in the last 15 years. It used to be the buyer and the seller met at the closing agent at 2:00 PM at this address, the seller would sign the deed, the buyer would have the money ready, and it's a standard thing. Nowadays, it's almost not done that way. The title company will send the deed to the seller and say, "Get this signed at your convenience, but it's got to be notarized, have it done the right way. You can come here if you want to, we'll help you with it, but you don't have to." And then they'll mail it back in. The money comes in by wire transfers.

In fact, because of the fraud, almost all of the title insurance/closing agents will not take your bank check anymore. You used to bring your bank check with you for your purchase. Now it's all by wire. If there's going to be a wire and you speak on the phone to your title agent, you do not take any information by fax or email or anything else. And we're in the midst of Florida going to online notarization. That has been legalized and there are now online notaries up and running, and that just became law earlier this year. And there's not many of them yet, but it is going to be the way things are notarized. You don't even have to leave your house to have it notarized. So you can have a closing and nobody leaves their house to do it. And that's the way it's headed.

Kimber Russell:

It sounds like there are a lot of opportunities for fraud in this process, especially as it moves more and more remote and online. What is your role as the attorney when it comes to the real estate closing process?

Dan Drake:

It depends on whose side you are on. But essentially, at the end, the seller should walk away with the money and the buyer should walk away with a valid deed. But to break it in a little bit more, the seller side is easier. The only way that you can really get in trouble is your deed that you have pre-signed to go to the buyer should never leave the closing agent's hand until the closing agent has hard money in hand. For the seller, making sure that they have fully disclosed any material defects with the property that are not open and obvious. That is where I see a lot of litigation from newly purchased homes. We have an old case that everyone knows in Florida, Johnson v Davis, that says, "If you have residential property for sale, you must disclose any non-obvious defect that would affect the value of the house."

And in fact, all the realtors now have a form that kind of asks the right questions for you to fill out. Yes, no, yes, no, yes, no, and please explain. So it helps you stay within a law. And I tell people, "Be honest with that. Because if you're not, four months from now, you're going to get sued by the person that you sold the house to for lying about the leaky roof that you've covered over with some paint." It's going to come back and haunt you. Be honest about your disclosure and get your cash and walk away. So that's the easy part on the seller's side.

On the buyer's side, I'm not an inspector, I don't go to the properties, but I do tell them, get a good home inspector. Number two, get a termite inspector. This is Florida. You've got to have a termite inspector in Florida. And yes, that's a separate inspection. And make sure you get them in time, during your due diligence, period because that's the time you can back out of your contract and not lose your deposit. And make sure the house is in good condition. And you're going to get a title commitment that will show liens that are on the property of whatever type. It's common to find the mortgage of the seller. That's fine. What you don't want to find is a lien for unpaid water or unpaid taxes or things you don't expect. If you see those, and that's what I'm looking for, is unusual liens, to make sure that the closing agent is aware of them, is aware of the payoff, and is going to pay them off and get a satisfaction at closing.

I have seen things overlooked that should not have been overlooked. A closing agent should have paid something off, but it was oddly stated on the title report, and I guess it didn't raise suspicion. But to me it was like, "I know what that is." There's money behind that. That had to be taken care of after the fact. But so I'm looking out for the buyer in getting the property free and clearer of any liens or encumbrances other than the ones they agree to, which is going to be like their own mortgage is going to become one.

And of course, the last thing is most banks, not all the time, will ask for a survey. I say, "Let me see your survey." I checked the property line for encroachments of other buildings from next door neighbors and stuff. It's just pretty easy to run the square. But also, who's got an easement? It's common for a power company or a cable company to have an easement along the back of your property because that's where the lines are run. What do I do about that? I say, "Don't worry about it. It's the power company. It's the cable company. They need to get back there if it breaks in your yard, really nothing you can do about it. Don't worry about it. You'll probably never ever see them back there."

So I don't want any surprises with what the buyer's getting. I usually check the closing statement to make sure that, every lien that I've seen, there should be a deduction on there from the buyer's funds to pay it off. If there's something missing, if the guy didn't pay for the roof and he owes a roofer for $12,000, I better see a $12,000 deduction to Joe's Roofing on that closing statement. If it's not there, we've got a problem.

Kimber Russell:

Now you have a lot of sophisticated clients, and it sounds like they are, and as we wrap up, could you give us some insight on what you think the core value is that you bring to your clients?

Dan Drake:

After doing these things for years and years and years, chances are, if I'm in a lawsuit, I've done five of them before and I know how they should go. And number two, and you'd be surprised how important this can be, is to get to know the judges in the counties you practice. They tend to have different ways of doing things. I had one judge that, if you had some paperwork that you wanted to use as an exhibit, you had better have one of those little dark yellow exhibit stamps in the corner and have it pre-marked before you walk into his courtroom. If you don't, you can't just write quickly in the bottom "Exhibit A." That's not good enough. It's got to be pre-done and ready to go. So that's something to know about that judge, that you better do that or you get on his bad side.

Some judges run a very, let's say, casual environment, which is kind of nice. And by casual, I mean the hearing is more like a discussion as opposed to arguments and the judge making a declaration. Most hearings are more like a discussion. "Tell me what the concern is here." And "Well, okay, judge, A, B, and C and I have some case law to back up A and B and I think it's appropriate that this happen." "All right, thank you." And then they'll turn to opposing counsel and, "Okay, sir, how do you respond to that?"

Kimber Russell:

Let's talk a little bit more about judge personalities. That can be good or bad for your client, right?

Dan Drake:

So being in front of the judges, getting to know their styles, what they like, whether they're very formal or informal, it is really a benefit. I could even go so far, and I'm not going to name names, but there is one particular judge that I almost could never lose in front of. And at that same particular courthouse, on the same type of cases, there was one particular judge I could almost never win in front of. If we pulled the judge that I could almost never win in front of, I would have a discussion with our clients and we have Judge A, and let me tell you about him. And because of that, we should look for ways to try to avoid a final hearing and work more towards settling the case because there's a good chance that we won't win and I can't tell you why.

I'm always very cordial to the judges. I'm easy to get along with just about everybody and I don't have a real aggressive attitude, so I don't step on toes very often. But if I have Judge B, which I can almost not lose in front of, our handling may be different, or our offering of settlement may not be as generous. The client might say, "I really don't want to work with this person though." And of course if I have Judge A, I say, "Look, I'm telling you, you need to think about it. Your in game is this. We may have to take a longer route to get there, but take the long route because it's this judge, you're not going to be happy." Where the other judge, the person says, "I don't want to work with them." I would say, "Well, okay. If you're sure of that, because chances are we're going to win anyway, so if you really don't want to, that's fine."

But it does impact the way that you advise your clients. They're as different as you and I. They're all following the same law, but you'd be surprised how different a law can be interpreted from one judge to the next. It's surprising.

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