Nonprofits on a budget sometimes struggle about how and when to hire an attorney. Getting legal help can be intimidating and expensive so being strategic about bringing a lawyer on board makes good sense. Here are some tips to consider before making the call.
When do you need a lawyer?
“An ounce of prevention is worth a pound of cure.” Community development corporations sometimes believe that lawyers are only needed for closings and lawsuits. However, there are many situations when some good legal advice at the outset of a difficult situation can save the agency time and money in the long run. If a nonprofit is entering into a significant contract or has a tricky employment decision to make, up front legal review can save a lot of headaches later on. On the other hand, there are many situations where the nonprofit can take on tasks that were formerly left to the lawyers—these include incorporating an entity with the secretary of state and annual corporate filings. The bottom line is this: if the stakes are high, or the issues are murky or unusual, think about reaching out for some support. A lawyer may be able to offer helpful advice at the right time.
The right person for the work.
It is critically important that the lawyer you hire has the relevant experience to assist your organization. This is especially true for public housing authorities and other public and quasi-public entities regulated by HUD or DHCD. Hiring a lawyer who is not familiar with procurement rules or open meeting law can be a recipe for trouble. Finding a lawyer with relevant experience can be handled through networking with other agencies and advocacy organizations. CHAPA also has a consultant page that identifies lawyers with relevant experience. http://www.chapa.org/consultant_browse
Talking about fees.
Any lawyer you hire should be willing to discuss fees openly and you should not feel uncomfortable asking about how much the services may cost. There are some situations where it may be difficult or impossible for the lawyer to provide a reliable estimate of how much the services required will cost. Complex litigation with a self-represented individual falls into this category. However, there are other engagements where it is reasonable to ask the attorney to provide at least a range of the expected cost. If you are retaining a lawyer for a closing, ask if the lawyer will provide a “not to exceed” price for the services. A lawyer’s tasks are similar from one closing to another and lenders typically pay their attorneys on a fixed fee basis. Therefore, you may want to ask whether the attorney would be willing to give you a fixed price for the transaction. Doing so provides both your organization and the lawyer some certainty. Other situations that lend themselves to a fixed fee may include contract review and preparation of simple contracts and releases.
Title insurance (for extra credit!)
Massachusetts is a “negotiated rate” state for title insurance policies over a certain amount. If your attorney is issuing a title insurance policy on a housing project under development and the acquisition price or loan amount is greater than $2 million, you should ask him or her to negotiate with the title insurance company the rate you will pay for your policy premium. For owner coverage (as contrasted with coverage for the lender), the savings can be significant. While a standard rate may be $3.65/$1000 of coverage for smaller policies, some title insurance companies are willing to reduce the premium on a large policy for a nonprofit to as little as $1.25. On a $5 million policy with coverage for your agency as the owner, that is a savings of $12,000.
Your relationship with your attorney is a key ingredient to the success of your organization. Call when you need to and seek out an experienced lawyer who will work with you to keep your legal expenses in check while advancing the mission of your organization.
Felicity Hardee is an attorney who helps nonprofits and affordable housing developers with their community development needs. She assists clients with closings involving multiple financing sources, including Low Income Housing Tax Credits, and provides compliance assistance, litigation services and general legal advice to CDCs throughout Massachusetts. Find her at www.fhardee.com, on LinkedIn and on Twitter at @felicity_hardee.