September 20, 2015

Amanda Ventura

Real Estate Law Guide: Abiding Time

When things are good, what is there to fight about? According to some legal construction experts, not much.

“Contractors are not willing to litigate any longer; They don’t want to pay attorneys to fight,” says Ed Rubacha, attorney at Jennings Haug & Cunningham.

When there were disputes between contractors, people relied on the option to sue people. Now, Rubacha says, companies have learned that doesn’t always yield a payout.

“From a construction perspective, we have seen a tremendous drop off in our business,” says Rubacha, who has been practicing law for 26 years.

There is some hope with increased construction coming through the pipeline. The more projects there are, the higher the chances are that lawyers will be needed, Rubacha says.

“I don’t get a call from a lot of my clients,” whom Rubacha says learned hard lessons and got smarter with the recession about how they do business.

“They either don’t have projects or the ones they’re on they have carefully worked them. Those relationships (between contractors) have led to a decrease in litigation.”

Rubacha says this emphasis on education over litigation has led to his involvement in more education work, such as holding seminars.

“I’ve seen more activity in the business side, including real estate and corporate, and a little less activity in litigation and cleanup work…when a project fails and something goes wrong,” says Don Miner, director at Fennemore Craig. “I’ve seen a little less work there and in the bankruptcy areas. Both of which point to good things down the road. In the law firms, we’re starting to see law firms wanting to be active in bringing on new people. What we’re still struggling with is whether those new people are laterals, or people who are moving from one firm to another versus people who are new and coming out of law school. The number of people being hired is still relatively low.”

Since Rubacha says construction lawyers are about two years behind real estate lawyers, he expects an uptick in the near future. Economic Modeling Specialists Intl., a CareerBuilder company, reported that for every law job opening there were two to four graduates. In Arizona, the numbers weren’t as stark, though the state did see a drop-off of 3 percent of available positions at the time of the 2013 study.

“One of the things the great recession taught us, including bankruptcy lawyers, is sometimes you need to be able to adjust to the marketplace,” Miner says. “Bankruptcy is now helping with turnaround management and equity financing development for troubled projects. A broader scope of services are being provided.”

Proof is in the Quitting

Even though there isn’t a whole lot of work out there, Jennings Haug & Cunningham attorney Julianne Wheeler says an indicator of changing times start in HR.

“We’re not seeing the typical legal issues,” she says. “Instead, we’re seeing anticipation.”

Part of this anticipation is the movement of high-level and project management employees seeking roles at different companies.

“Many (contractors) hadn’t positioned themselves to have much in terms of legal rights if a high
level employee leaves and goes to a competitor,” Wheeler says. “The best advice for the contractors is to make sure there isn’t any one employee who has sole ownership of a relationship with a client.”

While there is no shortage of lawyers, there is a shortage of contractors.

“The entire industry is concerned of the shortage of available talent,” Wheeler says. “(Contractors) left us in droves…as we’re ramping back up, (companies are) scrambling.”

Organizations such as Arizona Builders Alliance and Arizona Subcontractors Association are among many that are seeking to foster and encourage high schoolers to pursue careers in contracting.

Meanwhile, construction lawyers who aren’t advising on distressed projects or employee issues are going back to whatever they worked on before they specialized, Wheeler says.

“It’s the tail wagging the dog,” she says of her workload during the recession. “In the recession, you’re busier than ever because of disputes, now that the economy is rising you’re not nearly as busy.”

In 2014, Forbes reported more lawyers were moving their practice to a side-job while holding another profession full- or part-time.

“It’s so nice not to come into work everyday and feel depressed after speaking with your clients about their outlook for the future,” she says.

From this guarded excitement, Wheeler is seeing more joint ventures that keep companies from putting all their eggs in one basket as well as allowing companies to exercise their specialties.