The One Place You’re Still Overspending: Third-party Attorney Fees

Don’t let third-party legal fees drain your resources. Discover how Prophia helps CRE teams effectively collaborate with attorneys while recouping expenses in the process.

Collaboration with legal teams is essential in commercial real estate (CRE). Legal oversight ensures compliance, minimizes risk, and aligns interests for all parties involved. However, traditional legal review processes, often attorney-intensive, can become a bottleneck, leading to high costs and delays. This raises a crucial question: How can CRE professionals optimize collaboration with external legal teams while minimizing the associated costs?

This article explores this very topic. We'll delve into the challenges of traditional legal reviews and examine potential solutions for streamlining the process without compromising legal rigor. We'll also explore strategies for fostering effective collaboration with external legal counsel to ensure timely and cost-efficient outcomes.

Read on to discover how CRE professionals can have their cake and eat it too, and gain the ability to collaborate effectively with third-party attorneys while decreasing compounding fees.

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The CRE Deal Landscape Today
The Important Role Attorneys Play in CRE
3 Challenges When Working With Attorneys
Calculating Potential Savings With Prophia

Widespread Change Happening Across the CRE Deal Landscape

The commercial real estate market is undergoing dynamic shifts. Office owners face an uphill battle with high vacancies, while retail struggles to keep up with booming demand. In this competitive landscape, every deal matters, and the ability to analyze contractual obligations swiftly and efficiently is crucial. Traditionally, legal expertise has been the cornerstone of this process, but it can be time-consuming and resource-intensive.

The industry, however, is witnessing a paradigm shift towards digitization. Companies are increasingly recognizing the limitations of traditional, manual methods of contract analysis and are seeking innovative, technology-driven solutions to optimize the review processes.

Enter Prophia, a groundbreaking AI-powered platform designed to revolutionize CRE data management. The cutting-edge platform automates tasks like lease abstraction and data verification, streamlining workflows and empowering commercial real estate professionals to operate with greater agility. This not only reduces reliance on legal resources but also allows for faster turnaround times, enabling professionals to maximize deal flow.

The Important Role Attorneys Play in CRE Business

Despite the changes happening with CRE technology and the need for a more expedited leasing process, leveraging a legal perspective is still incredibly important. CRE transactions are intricate puzzles, with each lease, agreement, and amendment a unique piece. These complexities can lead to misinterpretations, risk exposure, and negotiation delays. That's where attorneys step in, providing invaluable expertise to CRE teams navigating tenant agreements and due diligence.

Commercial Lease Creation & Review.

When signing a new tenant or negotiating a renewal CRE lawyers safeguard property owners, ensuring they fully comprehend the legal implications embedded within each lease. By closely reviewing lease agreements, CRE lawyers champion the interests of property owners, identifying potential risks and ensuring every clause aligns with their investment goals.

While invaluable, this meticulous legal review can be time-consuming and expensive. When it comes to reviewing existing leases, Prophia's ability to analyze vast amounts of legal language across multiple documents allows it to provide real-time insights into tenant standings. This intelligent analysis often reduces the need for routine attorney review in many cases, allowing legal resources to focus on more complex issues.

Prophia also proves invaluable in crafting new leases. Teams can leverage Prophia's search functionality to quickly find successful clauses already in effect for other tenants. These serve as valuable examples, reducing the time and resources needed to draft strong agreements that protect owner interests. 

Due Diligence.

Whether disposing, refinancing, or acquiring a new asset, performing due diligence is often a lengthy and involved process. Third-party attorneys can help CRE leaders abstract and understand in-place agreements, and reconcile missing documents throughout the acquisition or sale of a property—but it can take significant time and money to get one-off or in-depth multi-asset reviews out the door.

With Prophia, the turnaround time on a complete due diligence binder is lightning fast—days instead of weeks— but speed is just the tip of the iceberg. Prophia fosters intelligent data management. Once uploaded, your portfolio documents become interconnected, automatically identifying inconsistencies and ensuring you're working with the latest information. This eliminates the need for CRE teams to constantly bombard legal teams with stacks of documents during negotiations, streamlining communication and accelerating the entire process.

3 Common Drawbacks When Working With Third-party Attorneys

Attorney collaboration is essential in CRE, but traditional methods often create data management headaches. From contract origination to lease abstraction and review, these are some of the inefficiencies that frequently come up between CRE teams and attorneys when working together on acquisitions, renewals, and more.

Challenge #1: Expensive fees.

Based on anecdotal data from our clients, attorney fees can range from $750 to $5,000 to review the standing of a single tenant. This cost varies based on location, attorney seniority, and complexity, but it burdens property owners with time and expense. However, by simply structuring and organizing lease data before it’s handed over to a legal team, and automating tasks like lease abstraction and data accuracy, running a review with an attorney becomes smoother and more cost-effective—if not unnecessary altogether.

Challenge #2: Turnaround times.

In the fast-paced world of commercial real estate, swift execution is paramount. Yet, traditional attorney-led reviews often become a roadblock. These slowdowns stem from two key factors: meticulous, clause-by-clause analysis to ensure legal compliance (a necessary, but time-consuming step), and the sheer volume of paperwork that attorneys need to sift through. This methodical approach, while crucial, can be expedited significantly through the use of AI technology.

In the case of Urban Renaissance Group’s purchase of The Lloyd Center, Prophia analyzed over 600 documents in 10 days, providing the team a complete due diligence binder in under two weeks.

Compare this to the traditional approach, where legal teams spend weeks sifting through mountains of paperwork, often missing crucial documents. Factor in the additional time to locate and review missing documents, and traditional due diligence can easily stretch into a month or more.

These delays can have a ripple effect, jeopardizing time-sensitive transactions and potentially causing missed investment opportunities in the fast-paced commercial real estate market.

Challenge #3: The “quality” of deliverables.

While attorneys are renowned for their meticulous approach, the "quality" of deliverables in this context goes beyond thoroughness. When working with legal teams, CRE professionals often receive lease summaries or other deliverables in formats like Word documents or emails. While convenient for attorneys, these formats pose limitations for long-term data management and portfolio-wide intelligence.

These documents appear suitable at first glance. But the future of CRE data management lies in integrating "smarter" document types. Imagine seamlessly searching for specific lease details or effortlessly exporting information into reports. This is where AI shines. Unlike static Word documents, AI can transform lease agreements (and other formats) into searchable data. This "smart" data easily integrates with other tools and reports, ultimately empowering informed decision-making.

Calculating the Potential Savings on Attorney Review Periods

Whether you are working with attorneys to review tenant data for a new lease negotiation or your team intends to add a new asset to your portfolio, Prophia smooths rough edges and fortifies the effectiveness of your portfolio data for future growth.

We’ll do the math so you don’t have to. If it typically costs $500/hour to review a lease with an attorney and their turnaround time is 5 hours, your team could pay approximately $2,500 for a single lease review. Apply that number across multiple tenants in your portfolio, and a one-off lease review gets very expensive.

When you open Prophia access to an attorney team, they gain access to all of the legal documents they need to conduct a review and shorten their turnaround time. With this verified data in one place, attorneys can quickly search across your portfolio, tenants, properties, etc. to uncover common language and conduct their reviews based on your portfolio’s historical data.

If that allows them to eliminate just two hours' worth of work, that is $1,000 in savings. Not to mention, the task automation and portfolio-wide accuracy that help optimize property operations, tenant and investor relationships, and more.

Ultimately, Prophia is not here to replace attorneys. Our platform also isn’t here to replace anyone on leasing or asset management teams. Our AI is here, however, to make these processes more efficient and help your team save valuable time and resources, when possible. Take a tour of the benefits your team can gain with the CRE industry’s leading AI solution.

If you would like to harness the power of next-generation AI and overcome some of today's most daunting market challenges, contact the Prophia team to learn about platform adoption for CRE.