Sometimes we find that the other side’s attorneys in our various transactions seem to behave “over the top” in the representation of their respective clients. Nevertheless, IF handled correctly and rationally, the client’s attorney/broker team can, and should, achieve effective results on the client’s behalf.
In a recent office lease transaction, it appeared to your broker co-author that our tenant client’s completed LOI was doomed from the start of lease negotiations. The amount of additions, deletions, and revisions submitted in the first lease revision by our client’s attorney seemed excessive. For example: in the “Operating Expenses” section, the Landlord’s original lease proposed 10 excluded expenses. Our tenant’s attorney added 27 more excluded expenses to that list!
Here are some valuable “Lessons Learned” that all should consider when faced with seemingly long odds in the lease negotiation process:
1. Attention to Detail: Some brokers are inclined to step away when the lease negotiations start. We strongly suggest that you resist that urge and instead stay connected with the process by reading each lease revision carefully, and then picking your spots as to adding commentary or advice. The brokers focus primarily on business terms and the attorneys focus chiefly on legal terms. In practice, that line oftentimes can be blurred during successive rounds of lease negotiations. Beware of that fine line and keep in mind that all comments should be to benefit your client, but maintain your client’s expectations with respect to achieving a successful outcome.
2. Achieving the Win-Win Outcome: In litigation, the objective is to seemingly hammer one’s opponent into submission to achieve a successful client outcome at all costs. In negotiating a real estate contract or lease, we found that that attitude can kill the deal at an early stage. Regardless of the emotions and disagreements over terms, we find it critical to put emotions aside, dig deep, never forget that BOTH clients are at risk here. In this negotiation, our client’s attorney AND our client had very definite ideas as to what items were most important and in the client’s best interests. At times I stated my views to the attorney, for and against our position taken. Through these candid discussions, we typically found common ground, advised the client accordingly, managed the client’s expectations, and forged ahead, round by round, until we achieved an acceptable compromise.
3. Managing Both Sides’ Expectations: Most importantly, throughout successive negotiating rounds, I had ongoing conversations with the landlord’s broker to gauge our respective clients’ expectations and stay on the same page as much as possible. We both knew that to reach a successful outcome for our respective clients, we distinguished those lease terms that were reasonable or unreasonable. This information was then conveyed to our respective clients’ attorneys. In this way, the tenor of the negotiations became calm and rational, and the focus was maintained on the most important issues, yielding an ultimately successful result.
Neither side achieved everything they wanted, but after seven weeks of negotiations, a deal was struck, providing our client tenant with new enlarged office space in an attractive, well-appointed and maintained downtown property to relocate its growing law practice. And the landlord gained a new tenant.