When it comes to sorting out the legal needs of your real estate business, it’s easy to get confused.
You might think you should wait until your business is more established before you need to worry about the legals.
Others assume they’ve got their bases covered, looking after a few things at the start-up stage, thinking they can then set and forget.
But according to O*NO Legal Founder and legal strategist Kristen Porter, there’s a little more to it than that.
Many business owners will be aware of what’s called ‘the business lifecycle’.
The cycle generally consists of five major categories – idea, set-up, growth, maturity, and exit – with growth and maturity alternating until it’s time to exit.
At each of these stages, the legal needs of your business will change, and the repercussions for not keeping on top of them can be significant.
Idea stage
The idea stage is often the most exciting. You’ve developed an idea you’re passionate about and you’re about to hit ‘go’. But it also brings a lot of emotion and many soon-to-be business owners become strongly attached to their ideas.
It’s important not to get carried away though, especially if you haven’t properly confirmed you’re able to legally use the name or logo you’re so passionate about.
You may have done some basic checks, but there’s more to names and trademarks than availability. If it’s too similar, and could be deemed as creating confusion in the market, you can be banned from using it.
This can be devastating, both emotionally and financially, if you’ve spent significant funds on logo development and other collateral.
My biggest tip? Don’t get too attached and ensure you are legally allowed to use your chosen name and logo before you spend a fortune on design.
Start-up stage
At the start-up stage we’re talking about building on solid foundations so that the upper floors aren’t at risk.
While there are several things you need to be across at this stage, I think the biggest decision you need to make is whether you are going to go solo, build a team or start your business with a partner.
The option you choose will determine the legal steps you need to take.
For example, if you’re planning to have a team, being across award and employment laws is imperative.
If you’re starting with a partner, the biggest risk is not being on the same page.
A shareholder’s agreement is the best way to guide your relationship and ensure there are no hiccups along the way.
Growth stage
The growth stage is all about increasing the value of the agency, so it’s important to ensure your referral and disclosure arrangements are compliant – keeping in mind these are different in each state and territory.
Getting this wrong can result in your real estate licence being revoked, so getting this right is critical.
During this stage, you’ll also be doing a lot of marketing, so it’s important to familiarise yourself with current digital marketing laws, and remember to keep across them, as they’re always changing.
Penalties can be in the millions, depending on the state or territory you’re in, but doing digital marketing the wrong way can also upset your prospects, so tread carefully.
Maturity stage
It’s easy to become complacent during the maturity stage, but now is the time to protect your asset’s growth and reputation.
One of the biggest risks at this stage is non-compliant agency agreements.
Even when the template itself is compliant, the agent filling it out might take a few short cuts.
Either way, if the form isn’t done right, you risk losing your commission, and therefore your income.
Exit stage
When it comes to selling your business, it’s not just about finding a buyer, but finding the right buyer, especially if you’re selling a rent roll.
You might have someone offer you $X, but if you lose $300,000 in lost management fees, then you might be worse off than you would have been had you taken the lower offer.
If landlords leave, not only can that reduce your price, but it can impact your reputation too.
The business you leave behind is your legacy, so it pays to find a buyer whose values align with yours.
Keep on top of things
Legal safeguards aren’t something you can leave until later, but they’re not something you can do once and forget about either.
Be sure to get advice as soon as you make the decision to start your own business, and make a plan from the beginning that covers when and how to keep yourself protected.
