When most people hear the word litigation, they think of lawsuits, headaches, and money flying out the door. It’s the cost of doing business, a defensive reaction when something goes wrong.
But what if litigation could be something entirely different? What if—when used strategically—it could actually create value, unlock opportunities, and even help you acquire deals that would never hit the market?
On a recent episode of Ritter on Real Estate, I sat down with someone who’s flipping the script on how investors view the legal system: Chris Zona, partner at Mendel Zonal & Barrett PC, veteran litigator, and advisor to real estate funds using litigation as a proactive investment tool.
Chris has tried more than 50 cases, including 30 jury trials, and has advised one of the largest healthcare companies in the world. Today, he helps investors use legal strategy—not just as a shield—but as a sword or a scalpel to play offense in distressed and value-add deals. This conversation completely reframed how I think about legal strategy in real estate. Here are the biggest takeaways.
Litigation Isn’t Just Defense—It Can Be a Source of Alpha
Investors often view attorneys as a necessary expense: they paper the deal, make sure your docs are clean, and protect you when something goes wrong. But Chris highlights a major misconception: litigation can be a tool to generate returns, not just safeguard them.
Instead of only calling your attorney when a deal is in trouble, what if that same attorney can help you:
– Access off-market opportunities
– Create leverage in negotiations
– Restructure deals that others walk away from
– Use non-performing notes to creatively acquire properties
This isn’t about suing people. It’s about using existing legal frameworks to create asymmetry and finding value where others don’t see it.
The Secondary Loan Market: A Treasure Chest Hiding in Plain Sight
One of the biggest “a-ha” moments in our conversation came from understanding the value hidden in the non-performing note (NPL) market. Here’s how Chris broke it down:
1. Banks don’t want to own real estate
When a loan goes non-performing—usually by missing a payment—the lender wants it off their books quickly. Holding distressed assets isn’t their business model.
2. Those notes can often be purchased at a meaningful discount
Investors can buy the actual paper—giving them control of the covenants, leverage, and a direct path to ownership or restructured cash flow.
3. Once you own the note, you have options
This is where litigation becomes a strategic tool—not in a hostile way, but in a structured, tactical way:
– Sword: pursue foreclosure and take control of the property
– Scalpel: use covenant breaches to negotiate a favorable workout
– Hybrid: lockbox agreements, receivership, or covenant-driven restructures
The goal isn’t just to “take” the property. In fact, Chris and I discussed how these strategies often create win-win outcomes: helping borrowers avoid catastrophe while helping investors create strong returns.
This Is Not a Strategy Reserved for Big Private Equity
Chris made a critical point: while large funds use these strategies, they’re often too big to be flexible. For smaller owner-operators or boutique investment groups, litigation-driven strategies can actually be more effective because they allow for:
– Flexible timelines
– Tailored exit strategies
– One-off opportunistic acquisitions
– Market-specific creativity
If you’re trying to grow from 4 to 10 properties—or double your portfolio—this can be a powerful bolt-on strategy.
Where This Fits for the Everyday Investor
If you’re considering adding this strategy to your toolkit, Chris recommends starting with two simple steps:
1. Talk to your lenders
Most investors already have relationships with regional banks, credit unions, bridge lenders, or private lenders. Ask them:
– Are you selling non-performing notes?
– What types of loans are being de-risked?
– How far below par are notes trading?
– Are there borrower situations that might need a creative partner?
Your next opportunity might already be sitting on their books.
2. Figure out how this fits into your growth strategy
This shouldn’t replace your core acquisition model. It should complement it. If your goal is one new property a year, this may not be your vehicle. If you want to scale—adding multiple properties or leveraging inefficiencies—this strategy opens up an entirely new lane.
Hairy Deals Aren’t Always a Bad Thing
We also talked about how litigation can enhance value-add deals through:
– Resolving partner disputes
– Cleaning up title issues
– Navigating complex easements
– Enforcing underutilized covenants
– Or simply giving structure to a messy operational situation
These aren’t the sexy parts of real estate—but they’re where skilled investors can uncover hidden value. As Chris said, “Hairy deals are often exactly the ones where this strategy works best.”
Why Now? Where the Opportunities Are
Without giving away the specific markets Chris is active in, he was clear: distress is rising—and with it, opportunity.
As capital markets tighten and debt maturities stack up, more notes are slipping into technical or payment default. Lenders want out, and the secondary loan market is more active than ever. That means:
– More discounted notes
– More motivated sellers
– More opportunities to control assets without traditional bidding wars
And for investors with the right team, it could be one of the most compelling ways to acquire great assets in today’s environment.
Final Thoughts
This conversation opened my eyes to a powerful, underutilized strategy for creating alpha in real estate. Litigation doesn’t have to be just a defensive move. It can be:
– A path to off-market deals
– A leverage tool
– A restructuring tool
– A value-add creator
– And yes—even a way to help keep borrowers out of catastrophic failure
As investors, our job is to see opportunities where others see obstacles. And this approach gives you a new lens to do exactly that. If you’re interested in exploring this, start with your lenders, evaluate your goals, and consider connecting with legal partners who understand both the investing side and the litigation side. It might just unlock deals you never knew existed.