In this article
Background
We've discovered that Lawyers across our customer base are increasingly turning to Legatics to manage their real estate transactions, in particular the due diligence process in the US: efficiently and effectively.
This article outlines our findings about Real Estate transactions focusing on due diligence. There are different market processes in different states - below are our generalized findings.
✍️ What does the due diligence process entail?
The due diligence process is an integral part of commercial Real Estate transactions involving the buying and selling of property. On the buyer side, inquiries are raised to gain a deeper understanding of the property, and these inquiries necessitate responses from the seller side. A buyer can either conduct due diligence before entering into a contract with the seller or after the contract has been fully executed. If a buyer wants to conduct due diligence after a contract is fully executed, the buyer should have a due diligence contingency in the contract. A due diligence contingency is a length of time specified in the contract for the buyer to carry out and perform due diligence. If the buyer is not satisfied with its due diligence the contract contingency gives the buyer the right to back out of a deal without penalty (i.e. the buyer will get its contract deposit back).
At a minimum, due diligence for a commercial real estate acquisition normally consists of: (1) an environmental assessment; (2) title and municipal records review; (3) a survey; (4) an engineering and building inspection; (5) a zoning review; and (6) review and confirmation of financial data.
As a sign of starting due diligence, a buyer typically pays a seller a due diligence fee. This is a non-refundable due diligence money designed to compensate the seller for taking the property off the market.
As mentioned above, a buyer may make a deposit either to the seller or an assigned third party, held until the termination of due diligence but that may be released on specific circumstances.
When the full due diligence exercise has been completed, a due diligence report is created, and any contractual negotiations are finalised before deal close.
💼 How is this process managed outside of Legatics?
Traditionally, a due diligence checklist is created manually using tools or applications like Microsoft Excel or Word. The buyer side conducts initial due diligence and raises enquiries, prompting the seller to populate a spreadsheet or table.
This spreadsheet organises responses, dates, and links to associated files. Typically, this responsibility falls on a trainee or junior staff lawyer, who manages the information received via email by copying and pasting replies and tracking the status and related documents.
👎Pain points
Time-consuming: Setting up and managing the spreadsheet manually is time-intensive.
Risk of errors: Copying and pasting emails to a spreadsheet increases the chance of missing information or miscalculating responses.
Version control challenges: Managing document versions sent via email is complex.
💼 How can Legatics be used to manage this process?
List Template Creation: Users can create a list template with all the necessary columns and statuses for the due diligence process.
Data Import: Utilise Legatics' import tool, often through the Excel or Word import feature, to bring the initial due diligence checklist into Legatics.
Role Assignment: Users can assign roles and they can also use the status column to update items.
Collaboration and Permissions: Invite external and internal users to action items directly within your deals using Legatics. Set permissions on lists, columns, and rows for controlled access.
Real-time Collaboration: All parties can log in to Legatics, respond to enquiries, raise further questions, upload supporting documents, and manage enquiry statuses.
Dashboard Usage: Utilise the dashboard to review the transaction's status.
📈 Key benefits of using Legatics
Time Saved:
Use templates to avoid manual copying and pasting from emails or spreadsheets.
Enable all parties to input directly, eliminating the need for a designated person for data entry.
Improved Clarity:
Real-time updates in Legatics ensure everyone has the latest information.
The dashboard provides an overview, reducing the need for additional documentation during meetings.
Version Control:
All versions are uploaded to Legatics, eliminating confusion from email exchanges.
Full audit trail for tracking document uploads, revisions, and contributors.
Error Reduction:
Responses directly added to Legatics reduce the risk of misallocation or mistakes.
The audit trail provides transparency for correcting errors when they occur.
✏️ How can I get started?
We encourage you to set up a demo matter first and work with your Real Estate colleagues to create lists in Legatics and import data from your Word or Excel files.
Then you can turn those lists into templates so that you can use them again and again. This will help save you time when setting up new lists within new matters!
You're ready to create a live matter and start managing your Real Estate transactions in Legatics!
Customisation for your firm and deal team
Free Text and Comments: Recognise that the template can be enhanced by incorporating free text or comments columns. This allows law firms to capture additional details or notes relevant to specific enquiries.
Status Columns: Tailor the template to your unique workflow by adding or adjusting status columns. This customisation ensures that the due diligence process aligns seamlessly with your firm's internal processes.
Columns and statuses can be set up within the list template meaning that you only need to do this once. Later, within the live matter, users can make changes to columns and statuses as and when required to suit the deal requirements.
⚙️Managing Visibility with Permissions
Fine-tune Access: We understand that different teams or individuals within your law firm and external participants may require different levels of access. Leverage Legatics' powerful permission settings to control visibility at various levels – from the entire list down to individual columns.
Optimised Collaboration: By managing visibility, you can optimise collaboration within your team, allowing relevant stakeholders access to the information they need without unnecessary clutter.
Granular permissions can be applied on a list level within each live matter to ensure that all confidential information can be kept private from each organisation.
If you have any further questions, please get in touch with us at support@legatics.com