Why are so many brokers and lawyers mortal enemies? I cannot being to tell you the stories I've heard about broker x and lawyer y fighting with one another to the detriment of a deal. I think there are two main reasons for this: (1) lack of communication and (2) interference.
I had a great conversation with broker and fellow blogger Duke Long yesterday that made me want to write about this.
In many deals if not most, brokers are at the table before the lawyers, negotiating the business terms and working the deal. That said, smarter client in my humble opinion get legal counsel involved earlier, such as at the LOI stage. They often take ownership of the deal, guiding it through for the client and to collect that commission. Sometimes we lawyers laugh at the brokers, thinking that they do nothing to earn their money -- which, by the way is way too much anyway since it is so much more than the legal fees. That happens sometimes, but not as often as lawyers think in my opinion. (And heck, sometimes lawyers don't earn their fees too.)
Conversely, some brokers unjustifiably see lawyers as deal killers. But our function is to point out flaws in deals, possible problems and raise issues so a deal can be properly underwritten. OK, once in a blue moon I will find a deal that "needs killin'." But that is few and far between -- a very rare occurrence. And even then, my advice is simply there to accept or ignore, to point out good and bad things about a transaction.
A lack of communication is often a problem here. Brokers, please realize that we are just out to protect our client's interest. That is what we are paid to do, and if we don't, we are in major league trouble not to mention incompetent. Lawyers need to realize that brokers have a vested interest in getting a deal done and should work with them toward that end. Getting to the closing table ought to be the goal. That is why I like to talk to my client's broker in the deal, so he or she knows where I am coming from and that I am simply not some annoying impediment to a commission.
That leads me to interference. We each need to respect the other's boundaries. Brokers should try to lawyer the deal; when a legal issue comes up, refer it to counsel. It is not only the right thing to do but usually the legal thing to do, unauthorized practice of law and all that. (Note: Here in Illinois, a lawyer that has a broker's license cannot act as both the lawyer and the broker on a deal.) And lawyers should, unless there is a compelling reason or unless you are asked, stay out of the business side of the deal. A lot of us are frustrated business people or (in my case) business owners ourselves. But by and large that is not our function, substituting our client's judgment with our own. And they hired a professional to help with that. (There are exceptions to every rule, of course, but I see this all the time.) And often our business advice as lawyers is not quite as stellar as we might think it to be.
As a general rule, I have had terrific relationships with brokers. We respect each other. Have I run across some for which I have had little respect? Sure, but not as many as you might think.
In short, there's room at the table for everyone. We each have our function, advising our clients and getting deals done. I think brokers and lawyers would get along a lot better if they just realized that instead of trying to bash the other as a waste of money or time or a detriment to the deal process.
