Before closing on a commercial real estate transaction, knowing how much an attorney will charge is essential. The attorney fee for commercial real estate closing tends to have a wide range in price.
Expect to pay a figure in the low thousands of dollars for a standard commercial real estate closing to more than $10,000 for heavily negotiated transactions.
Small commercial transactions typically require only basic contract drafting and general counsel, while mid- or large-size transactions may involve a complex settlement or a substantial dispute.
What Is a Commercial Real Estate Closing?
Closing a commercial real estate deal is the last step in buying or selling a commercial property, such as an office building.
After the paperwork has been signed and the deal has been finalized, the closing attorney will review all the documents to ensure everything is in order. The real estate attorney will usually also prepare any final documents that need to be signed by both parties.
Once everything has been reviewed and signed, the keys to the property will be handed over to the new owner. The closing attorney’s fees will vary depending on the transaction type, the property’s location, and the amount of work involved.
Their fees may be as low as a few thousand dollars for a simple transaction. Their fees could reach tens of thousands of dollars for a more complicated transaction.
What Are the Components of the Attorney Fee for Commercial Real Estate Closing?
An attorney may charge a few different types of fees for their services. Ultimately, the attorney fee for a commercial real estate closing varies depending on the intricacy of the transaction and the amount of work required.
It’s always best to discuss fees upfront with your attorney, so there are no surprises later on down the road.
A Retainer Fee
The retainer fee is a fee paid upfront to secure the attorney’s services. This fee is generally nonrefundable, even if the deal falls through or the attorney cannot complete the work for some reason.
An Hourly Rate
This is what it sounds like — an hourly rate charged for the time spent working on the case, which may involve title insurance, loan payoff and paydown, title search, deed preparation, and recording fees.
Depending on the specific attorney and their experience level, this type of fee can vary greatly.
A flat fee gets charged for specific tasks or milestones completed during the closing process. For example, an attorney may charge a flat fee for drafting and reviewing documents related to the deal or for attending and participating in meetings with other parties involved in the transaction.
How Much Does It Cost To Hire a Lawyer To Close on a Commercial Property?
The price of hiring a lawyer for a commercial real estate closing can fluctuate based on various factors, such as geographic location and the attorney’s experience. Some attorneys offer flat-fee packages for various transactions, and others provide special deals.
A typical real estate lawyer can charge between $1,500 and $3,000 for a standard commercial real estate closing.
In some cases, however, the cost can be much higher, with lawyers charging upwards of $10,000 or more when the transaction is complicated and involves substantial negotiations.
Smaller commercial transactions typically require only contract drafting and general counsel and are likely to involve only minor disputes. Larger commercial transactions are more complicated and involve a wide range of services.
Contact several attorneys and compare their services when determining how much to spend. If your transaction is complex, it might be worth paying a higher rate.
How To Calculate the Attorney Fee When Closing on Commercial Real Estate
When calculating attorney fees, consider the size and complexity of the transaction. For example, a simple lease negotiation may only require a few hours of work, while a large commercial development project can take months or even years to complete.
The first step in calculating attorney fees is identifying the type of legal services required. The most common legal services for commercial real estate transactions are title examinations, title insurance, and closing services.
The next step is to estimate the time required to complete the work. This can be done by looking at comparable transactions and speaking with other attorneys who have experience with similar types of transactions.
Once you estimate the required time, you can begin calculating the attorney fees. To determine the total cost, multiply the estimated time by the attorney’s hourly rate.
For example, if an attorney charges $200 per hour and you estimate that the project will take 10 hours, your total fee would be $2,000.
Keep in mind some attorneys may charge a flat fee or a percentage of the total transaction value instead of an hourly rate for certain types of work. Plus, it is essential to note that attorney fees are typically negotiable, and there is no set formula for how they should be calculated.
What Can Increase Attorney Fees?
When zoning issues occur in your real estate closing, you can take them to court. Zoning impacts your taxes, full compensation for eminent domain, and property value, making it important to secure the most favorable zoning parameters during your closing.
Attorneys can help you navigate zoning issues and resolve them favorably. However, taking zoning issues to court will incur higher attorney fees.
Lot Line Issues
Similar to zoning issues, lot line issues can drastically impact your property value. Especially when treating property as an investment, it’s vital to secure property lines that set you up for the most excellent returns.
Often, disputes over property lines are resolved in court. Having an attorney to help you argue your case can make the difference in civil cases; however, this will also raise the total fees charged by real estate attorneys. Depending on the length and difficulty of the case, you may wind up spending substantial amounts to secure the lot lines you want.
Depending on the property you’re closing on, you may have to navigate easements. Easements are rights or legal permissions for others to use your property.
Public easements are for specific purposes and open your property for public uses like roads or utilities. While these are public uses, government entities traditionally navigate the process of obtaining the easement through eminent domain laws. These often involve court cases to settle, and having a good attorney can help you secure the most favorable public easement arrangement.
Private easements are granted to specific individuals access to your property for particular reasons. These also often require court cases to establish.
Both types of easements may be challenging to navigate in court. You may have essential public or private that require your property, and an attorney can help ensure the easement arrangement is as minimally invasive as possible. However, depending on the property you’re closing on, this may incur higher attorney fees after the court case s settled.
Notices for Unauthorized Tenants
Unauthorized tenants can be costly and frustrating, though landlords are within their legal rights to remove them. Navigating the legality of removal, however, can be tricky.
Enlisting an attorney to ensure you provide unauthorized tenants with notice before eviction can help minimize costs in the long run. Attorneys will charge additional fees for their services, but without legal assistance, you risk lawsuits that cost you more in the long run.
When a person dies without bequeathing their property, probate sales occur. Probate sales are often cheaper than other real estate transactions; however, they require the buyer to confirm the purchase in probate court. This will require additional attorney fees.
Additionally, with probate sales, the sale is then opened to an auction-style bidding process, with the court-confirmed offer as the opening price. If you’re not careful, you may pay attorney fees for a probate sale and lose the property in the auction.
When a real estate debtor cannot repay their debt, they must file a plan for recouping their debts to the creditor. Often, this includes selling their property, either through a private transaction or public auction. Filing for bankruptcy, however, isn’t free.
In the process, you’ll have to pay additional attorney fees to cover your filing costs. You may also have to pay for credit counseling and debt education courses. Additionally, in court proceedings, your attorney will charge additional fees.
Ways To Save Money on Attorney Fees for Commercial Real Estate Closing
There are several ways to save on real estate legal costs when engaged in a commercial property closing. A client can ask the attorney to provide a flat fee quote for the entire transaction.
Another way is to negotiate the hourly rate charged by the attorney. The buyer could request that the attorney waive or discount specific fees, such as the title search or recording fee.
When negotiating the contract of a sale, it is a good idea to do due diligence and get the property inspected by a licensed real estate inspector. The inspection can identify any problems that may need to be addressed and may save you time and money during negotiations.
In addition, the inspection can help sellers determine their asking price and help them set the price accordingly. Buyers, meanwhile, can request an inspection of the property themselves, typically at their own expense.
Before the closing, the attorney will conduct a title search to ensure the seller’s ownership and ability to transfer the property.
A title search will also reveal any restrictions on the property that may affect the transfer. The attorney will also prepare an opinion of the title, which could be presented to the title company for title insurance purposes.
Key Takeaways About the Attorney Fee for Commercial Real Estate Closing
Legal costs and attorney fees for a real estate closing on commercial property can vary depending on the transaction’s complexity and the lawyer’s experience. You should speak with several attorneys before selecting one to represent you in a commercial real estate transaction.
During the vetting process, ask each attorney about their experience with commercial real estate closings, fees, and availability.
Once you have found an attorney you feel comfortable with, you can begin to work together on finalizing the details of your commercial real estate closing.
To potentially save money on legal costs, there are a few steps to take:
- Get a written estimate of the attorney fees.
- Ensure you understand what services the attorney will provide and the estimated cost for each service.
- Ask the attorney if they offer any discounts, such as for flat-fee or bundled services.
- Inquire about payment plans or other arrangements that may make your attorney’s fees more affordable.
- Be prepared to negotiate with the attorney on their fees, especially if you have a limited budget for legal services.
Expect to pay more than a thousand dollars for an attorney’s services. While this may seem like a lot, an experienced attorney can save you time and money in the long run by making sure the transaction goes smoothly.