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REAL ESTATE "A lot of new development projects will come grinding to a halt," says Lem, a partner at Davies Ward Phillips & Vineberg LLP in Toronto. Even though the subprime mortgage crisis was made in the U.S.A. and Canadian banks are relatively immune from catastrophic failure, there will be a significant knock- on effect north of the border, he says, as funds dry up from large U.S. lenders and Canadian financial institutions become more cautious and vigilant. He reports that some lenders are already invok- ing contract clauses that will let them withdraw financing in bad market con- ditions, while anyone trying to renew a fixed-term loan can expect to be hit with higher interest rates, and some may find they are not able to renew their loans at all. Lem says, "then, they're going to find it very difficult to refinance because no- body wants new deals these days. "We're going to see a lot more power of sale, foreclosure, insolvency, and work- out. It's as simple as that. We're going to see it and it's going to happen soon, if it's not well underway," he says. And what does this mean for lawyers? "It's not the end of the world for real estate guys," says Lem, who is planning to "retool," placing more emphasis on his insolvency-type practice, while also hoping to do some work with specialty lenders that will likely be offering help to cash-strapped developers with high- interest financing. Nevertheless, Lem maintains, it's a myth that lawyers make as much money on the downside of the market as they do in a real estate boom. A good insol- vency practice can certainly help ame- liorate the losses from lending or merger and acquisition practices, "but it's sec- ond-best as far as volume and profits are concerned." Lem therefore predicts that hiring will become an employers' market. As- sociates will probably be able to hang on to jobs, he says, "but it will be tighter than it ever was before and I don't feel well for the students coming through right about now — they'll have a much tougher time than the guys a few years ahead of them." A slowdown in property development will likely mean less work for commercial ntitled-1 1 real estate lawyers, but it could also mean that each project they do work on will be far more labour intensive and require more detailed scrutiny, according to Har- ry Herskowitz, senior real estate counsel at DelZotto Zorzi LLP in Toronto. "Ev- erybody's going to be looking harder at deals," says Herskowitz, who frequently acts for builders and developers of sub- divisions and condominium projects. He observes that the U.S. crisis will certainly result in short-term difficulties in getting development funding. In the long term, if the market actually moves into a reces- sion, he sees five major impacts: - ects, budgets, and repayment sources. This will include more scrutiny of agree- ments of purchase and sale, as well as future homeowners' or condo unit hold- ers' mortgage approvals. "They may also want more down payments in order to Innovative Thinking Helps Close More International Deals At First Canadian Title we thrive on professional challenges, we take pride in the commercial services we provide and we share in your enthusiasm when helping close a transaction — large or small. Let us help you close your next international deal by providing innovative thinking backed by the protection of a commercial title insurance policy. Insurance by FCT Insurance Company Ltd., with the exception of commercial policies by First American Title Insurance Company. Services by First Canadian Title Company Limited. This material is intended to provide general information only. For specific coverage and exclusions, refer to the policy. Copies are available upon request. Some products/services may vary by province. Prices and products offered are subject to change without notice. TM Trademark of The First American Corporation. www. mag.com NO VEMBER / DECEMBER 2008 21 10/15/08 11:10:07 AM