Tax Attorney Daniel Smith: When Law Firms Collaborate, Property Owners Reap the Benefits on Their Bottom Line
Traditionally, a commercial real estate owner would retain several law firms, each with its own area of expertise. One firm might handle development, construction, acquisition and leasing issues, while another firm would oversee contract disputes and litigation.
Although it may have become conventional, this service model is losing its appeal. Law firms with mutual clients often fail to communicate with each other, sending mixed signals to the client and leading to inconsistent advice.
As owners become more astute and the market for legal services grows increasingly competitive, owners can now demand that law firms seeking their business distinguish themselves from the competition.
One of those distinguishing attributes is the ability of the firm or its real estate practice group to address an owner’s overall real estate needs, not just a specific function. This approach better enables the law firm or practice group to demonstrate their understanding of the owner’s business and commitment to achieving the owner’s goals.
Some service-oriented law firms recognize this and have learned to provide value in practice areas beyond those for which they were hired. They are now looking to bring in additional professionals to ensure that their client-service teams have the expertise to handle the universe of challenges a client faces, with the experience to deliver results.
Rather than attempting to hire specialists in practice areas they don’t have, savvy law firms accomplish the broadening of expertise through collaboration.
An example of specialties that a firm may handle through collaboration is property tax representation. Although real estate law firms have clients with large property portfolios and corresponding property tax expenses, property tax is a practice area that few real estate law firms or practice groups cover.
Real estate law firms typically lack the valuation experience and relationships with appraisal districts necessary to best handle their clients’ property tax issues. There are other specialized attorneys that do have property tax expertise, however.
Several boutique law firms and practice groups in larger firms devote all of their efforts to protecting clients from appraisal districts’ excessive and erroneous property valuations and exemption determinations.
Through this focused scope of service, they have developed appraisal expertise and the ability to effectively navigate the traps and pitfalls of the property tax practice area. As a result, they can deliver significant tax savings to property owners.
When these boutique practices collaborate with a client’s primary law firm, they become critical components of the client service team. Importantly, collaborating with the primary firm’s attorneys enables property tax lawyers to maximize efficiencies in pursuing tax protests and obtaining successful outcomes — adding value that clients are coming to expect.
The most notable efficiencies come with sharing information. The client’s primary law firm will likely have institutional knowledge about the client’s business and properties that could be greatly beneficial in a tax protest. This could include detail about the client’s purchase of the property, such as purchase agreements, appraisal reports, settlement statements and financing documents.
Additional detail could include the client’s reasons for acquiring the property and improving it to include specific features, construction contracts and expense reports, and financial records concerning income that the property generates along with corresponding expenses.
Lawyers at the client’s primary firm, moreover, may offer explanations as to why certain properties have decreased in desirability, resulting in obsolescence and falling demand, and thus reduced value. This is all helpful information that a property tax specialist would want to use in advocating for the client.
Without this collaboration, the client’s tax protest may be compromised because important information, which could affect the outcome of the protest, may be overlooked or forgotten.
Conversely, specialists can potentially bring different approaches to solving client problems, offering perspectives from their property tax experience. Property tax attorneys pay close attention to capitalization rates, financing trends and sales of comparable properties, which the client’s primary attorneys may use in negotiating real estate transactions.
Because of their valuation expertise, property tax attorneys can advise other counsel on assessing damages in real estate partnership disputes or construction defect claims, and can provide recommendations for quality appraisers to serve as expert witnesses.
Property tax counsel can further provide regular updates on the evolving area of property tax law and advise on how best to position the client to minimize tax liability through tax exemptions or abatements, or otherwise. This collaboration would mutually serve all counsel involved for the ultimate benefit of the client.
Clients want to see that their business interests are being looked after, and are beginning to ask that lawyers collaborate to ensure the right professionals are on their team. This collaboration provides added value to property owners.
Daniel R. Smith is general counsel for Austin, Texas law firm Popp Hutcheson PLLC, the Texas member of American Property Tax Counsel, the national affiliation of property tax attorneys. He represents commercial property owners in property tax appeals across the state, and can be reached at [email protected]