Michigan real estate lawyers are again feeling optimistic

By Gary Gosselin

Dolan Media Newswires

A real estate market that drove many lawyers into other areas of practice is showing signs of life after five years.

"It's a resurrection we're going through now," said Lansing attorney John Fifarek.

"Many of us who were in real estate in the boom of the early 2000s were litigators and workout [specialists], things we thought we would never do again. Things went bad and we found ourselves back in the courtroom," he said.

A resurrection, too, because many of the business associates either went away, went insolvent or made extensive use of the workout folks.

"The sad thing is, after five to six years of this, many developers that we represented don't exist anymore; a number of construction companies that existed in 2007 and 2008 are not around any more ...," he said. "Maybe it was too good in the early 2000s; money was available, government funding was available, everybody wanted a new building, things were strong. That sure changed five or six years ago.

"Right now to some extent, it's as simple as banks are talking to borrowers again, there are at least rumors that the credit markets are opening up, and there will be money for projects."

Now, it's almost like having to start all over again, he said.

"I'd hate to be a lawyer out about five years and being in the real estate game. They haven't really had a business to deal with," Fifarek said.

Condos redeveloped

A number of residential and condominium projects were simply abandoned when the market and capital dried up, said Bloomfield Hills attorney C. Kim Shierk.

"We're seeing now that there is an upturn, particularly in redeveloping condo developments that were started but weren't completed," Shierk said. "They are definitely picking up now, usually with a new developer coming in. And with those that sat for a couple years, they bring in unique problems. That's a hot topic now."

A lot of those projects need new documentation and agreements, making for some business for the legal community, she said.

One area that almost always involves legal support is in the condo area, where, for instance, a condo owner defaults, said Bingham Farms attorney Daniel Feinberg.

"One trend that we've been seeing over the last few years is that the owner of the unit is in a position where they can no longer pay the mortgage or dues, and banks or mortgage companies are forcing people out, but don't foreclose because they would be liable for the fees," Feinberg said. "And that leaves the condo association on the hook for shortfalls, and leads to increased assessments. That leaves [attorneys] trying to come up with ways to get mortgage companies to pay."

And, when a new developer comes in to buy a partially build condo project, the developer still has a 10-year window to build out the project, Feinberg said-- leaving those who are there or those who have a monetary interest in the property in the middle of what is an unfinished, open-ended construction zone.

"We have run into mid-build situations, and have sued developers with varying degrees of success," he said. "If they file bankruptcy or just disappear, it's hard to get justice for those who did buy. Now there are certain entities who go looking for these distressed projects, buy up mortgages for pennies on the dollar, and close out the original developer."

That successor buyer generally can't be compelled to complete except within the 10-year window.

Residential, commercial

picking up

One source of business are sites that started and stopped but needed permits, variances or maybe even brownfield redevelopment permits or tax credits, Fifarek said.

"If it was an intense project with permits, brownfield issues, etc., many of that has expired. They went cold," he said. "That makes our outlook better than it was last year. People are now eager to get back at it again with those projects."

The Grand Rapids real estate market has stabilized, said Grand Rapids attorney Jonathan J. Siebers.

"I recently spoke with an in-house broker for a bank that owns residential developments, and they're starting to sell lots and getting bites on other vacant land as well," Siebers said.

"I have a client closing this week on the purchase of vacant land where he is going to build retail, a standalone retail facility --and it's already leased. I wouldn't have seen that just a couple years ago."

Even the office market has stabilized, Siebers said, noting that four years ago, the norm would have been long periods of free rent or other incentives to bring in lessees. But Siebers said that doesn't happen nearly as often as it used to.

"I'm optimistic," Fifarek said. "I think things are going to get better sooner rather than later. Some people say 10-15 years to fully recover, and I hope it doesn't take that long. I don't think it will take that long."

Published: Mon, Jun 17, 2013

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