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REAL ESTATE minimize the likelihood of purchasers backing out of the deal." before they are prepared to finance construction, particularly in high density developments. They will also be concerned about the enforceability of the agreements of purchase and sale, so it will be important to ensure that the developer has not made a material change in the project that would give purchasers a right to get out of the deal. This could include opinion letters from counsel stating that the agreements are fully enforceable and unconditional. the developer and possibly more security from guarantors with a more solid asset base than the developer. They may also want restrictions on the developers or their guarantors moving as- sets without the lenders approval. subordinate financing or other outstanding loans that might have an impact on the developer's cash flow. "They're going to restrict you from doing anything vis-à-vis the project or incurring debts unrelated to the project, if you're the borrower or the guarantor of that borrower. They want you exclusively. They don't want any other impact on your source of funds." and complexity of projects. This is because the risk of having to take over a project before it is finished is "a lender's worst night- mare" and the more complex the project is the more difficult it is to finish and the more expensive it is to bring in new people. "I see some of those signs already today and I think they'll just be more pronounced if we get into a really recessionary real estate market," says Herskowitz. If the property market begins to spiral downwards, there is the risk that potential homebuyers will stay out of the market because they hope or fear that prices will keep going down. This, in turn, will make it harder for developers to pre-sell their units and meet the thresholds that lenders will require before they advance construction funds. "This tightening market has a whole bunch of tentacles," says Herskowitz, noting that various trades, subcontractors, and ancillary businesses will also suffer — "and lawyers act for all of those trades as well." "Then the focus on real estate becomes — instead of borrow- ing — how do I issue power of sale," he says, noting lots of law- yers are taking refresher courses "in case the worst happens." "You will also see more liens registered. Project payments get slower so liens go on faster. They get more nervous. So, instead of waiting the full 45 days to file a lien, maybe they only wait 30 days," says Herskowitz. RESIDENTIAL: TIME TO BE PRUDENT Ron Usher can already see the impacts of the U.S. financial crisis on clients of his Vancouver real estate practice. "The credit tightening starts to flow through everywhere," he says, describing the plight of clients who are having difficulty refinancing their expensive Vancouver home because their assets are tied up in a U.S. business they own. Usher, a partner with the law firm Bell Alliance, also cites the example of other clients from the U.S. who are afraid their bank will go under and they will lose their money. Instead, the clients want to use the money to buy Vancouver real estate. "As quickly as possible, they want to take their U.S. bank money and put it into dirt in B.C. because they feel that is secure," says Usher. "When people start to get panicky about this stuff all sorts of things start to happen." Generally, however, Usher observes that the Vancouver Happy clerk, Happy work. Our software improves quality of life. 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By any historical standard, Vancouver is a very busy place still and we certainly haven't seen our file numbers drop off anywhere near that amount." Nevertheless, he predicts, "There's going to be less work to go round. And in B.C. we have competition for this work. The notaries are lawful competition for this kind of practice." Yet there are advantages to a quieter market, according to Tel: 416.322.6111 Toll-free: 1.866.367.7648 www.doprocess.com 22 NO VEMBER / DECEMBER 2008 www. mag.com Usher, who spent many years as staff lawyer for the Law So- ciety of British Columbia, providing advice to lawyers on how to improve their practices. "There were times when people engaged in panicky buying and the normal things that a law- yer would recommend in terms of due diligence they let go," he says, explaining that clients wanted to "just leap in and sign everything."