With over 1,000,000 attorneys and over 150 law schools graduating attorneys each year, the average American is well represented (ABA website data). According to the "Power of Attorneys" website, a survey conducted by the American Bar Association in the 1970s revealed that 70 percent of Americans not only did not have an attorney, but they also did not know how to find one. That is not the case today.

The implications are far-reaching for every businessperson -- especially those that are involved with the ownership, rental and management of real property. As an investor not only do you need to be aware that you might get involved in a lawsuit (one of those inalienable rights protected by the constitution), but also that you need to fight fire with fire. In other words, you need to have your own attorney, and perhaps more than one.

Issues you may face include the Landlord Tenant Law (for residential owners), Fair Housing Laws, Environmental Law, Zoning laws, Land Use Planning Regulations, Tax Law and IRS Regulations, Estate Law, Construction and Construction Defect Law, Lien Law, Americans with Disability Act, Contract Law (Commercial investors) , Employment Law and laws regarding Privacy.

Clearly real estate investors face potential lawsuits for every decision made. The number of annual changes to these laws provide additional challenges. No single lawyer will have all of the answers. Some lawyers additionally may not handle your case due to potential conflicts of interest. To survive in today's working and investing environment, you should know at least two attorneys in each aforementioned category or at least have a good referral system in place.

Don't expect all attorneys to be equal. As in every business some lawyers are first-rate and some are not so good. Just because they charge $300-$500 an hour does not mean you will ever see them. The most expensive attorneys are often so busy that you end up with an associate. You really should research their background to ensure they have the experience to address your needs. It is important to obtain references, and it is equally as important to ascertain if your personality can accept advice from the attorney you choose.

You need to educate yourself in the basics of the laws. Now is not the time to be an ostrich and bury your head in the sand. You cannot hide from potential lawsuits; you can only prepare yourself to deflect them. Realize that much of the litigation out there can be categorized as legal blackmail. Many people don't accept responsibility for their actions which leaves you responsible in the end. This has spawned a huge increase in tort litigation.

In an effort to control ever-increasing litigation costs, and to battle what are seen as unfair lawsuits, the American Tort Reform Association (ATRA) was formed.

Their agenda includes the following:

  • Health care liability reform
  • Class action reform
  • Promotion of jury service
  • Abolition of the rule of joint and several liability
  • Abolition of the collateral source rule
  • Limits on punitive damages
  • Limits on non-economic damages
  • Production liability reform
  • Appeal bond reform
  • Sound science in the courtroom
  • Stopping regulation through litigation

In their battle to help us control our operating costs, the ATRA has come across some very unusual lawsuits, illustrating how people will stop at nothing to get others to take responsibility.

In addition to having your own attorneys to help guide you, you must comply with the laws and have enough insurance to cover your risks. This can be a great challenge as increased insurance exposure and litigation has forced insurance companies to increase premiums. This is why some doctors have chosen not to carry medical malpractice insurance, for example. Consider the formation of single entity LLCs to contain some of the litigation risk.

Make sure you inspect your properties. Look for dry rot, mold and mildew, the potential for playground injury, trip hazards, exterior lighting, fire hazards, environmental issues. Be sure to do a thorough job screening potential tenants. This is of equal importance for commercial and residential tenants. Use vendors that are licensed and bonded. Care about your employees and your tenants, and they will look out for you.

The bottom line is that you need to be proactive regarding protecting your investments. An ounce of prevention is worth a pound of cure.

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