The Art Of Not Responding

not responding 5Most of us learn when and how to respond in order to  get along with others at an early age.   In the elementary school years we learned that there are boundaries to when and where you can say things that you think.  As we get older and mature, we also learn to listen – hopefully.  Although it is sometimes amazing that some very experienced professionals have lost their filter on when to listen to someone, keep their thoughts to themselves and then respond when it is productive and useful in business disputes and transactions.  

In my practice, I have found that some of the most bright and knowledgeable people simply cannot restrain themselves from exploding into commentary, criticism or downright insulting language when they feel that their clients’ interests are not being fully represented in a discussion. As most business folks can attest, lawyers (especially) who can’t seem to work with a group of people to get a deal done, resolve a contract dispute or simply project a personality that encourages others to move forward towards a mutual goal can be obstructive or even destructive to the process. 

not responding 3On the other hand, some of the most successful people  in the business world have learned the simple art of not responding. This is not a sign of weakness or lack of skill and knowledge.  Instead, it is a way to pause, think and also consider what other parties in the discussion are saying and meaning by what they say.  

Litigators probably see this more often than any other group of attorneys. And they will tell you that time after time, letting an opponent drone on and on gives them an advantage, as they find out something they didn’t know and possibly would never have been disclosed. I have seen attorneys literally hang themselves and their clients by not resisting the urge to sit down and stop talking in an attempt to emphasize their position. 

On the other hand, those who don’t respond after hearing a diatribe, often end up with an advantage simply by not talking.

The same is true in the business world, especially in multiparty negotiations. Sure, whether you practice law or finance or real estate, there’s always a fear that if you don’t project yourself aggressively and often that you may be perceived as being ineffective.  However, experience often shows that there are few successful people that look for this as a positive trait in their opponent or person they’re negotiating with.  More often than not, the lack of a response or delayed response is both appreciated and helps to move the discussion forward.  There are folks that will insist they want the bulldog who as an attorney or a broker will  get in people’s faces, jam fingers at them and say essentially it is “my way or the highway.”  The press has often not done a good job of showing that these people get marginalized in their business and by their own colleagues. 

not responding 2Many more times, the pensive and thoughtful professional is the one who will get repeat business and form strong relationships in his or her industry.

Notwithstanding all of the above, there is certainly a time to speak up and make sure that you or your client’s position is clearly heard and understood. However picking those times is crucial. The curse of many teens is that too often they know what they want to say and what the goal is, but they simply cannot stop themselves from speaking out loudly and abrasively. How well do that work out?  As you grow older though you learn to pick your battles and appreciate the power of silence and the ability to truly listen to other people in business and law. 

Honing the skill and truly knowing when not to respond and then speak up when appropriate is a task that most of us will struggle with through our professional lives, but ought to be at the forefront of our minds every time we step in to meeting or have a conference call.  It will pay dividends.

Confidentiality and Non-Disclosure Clauses in Commercial Contracts – Is it worth the Effort?

Let’s set the scene….

The parties to an active litigation case or in the case of a pre-filing settlement discussion or mediation have worked hard, given up more than they wanted to or not received as much as they desired, and are concerned collectively about how their attorneys fees are continuing to pile up. Throw in some bruised egos and negative past events that have been ruminated over and rehashed and you have folks who want to get something down in writing as to basic terms and be done. Details be damned! That’s what the lawyers are there for. Right?

This situation creates fertile ground for the parties, and perhaps even their attorneys, to not spend the time and effort that they should in crafting a solid, workable and individualized confidentiality agreement that captures the present and future concerns the litigants may have about anyone else discovering the details of their settlement. Many clients suggest lawyers use “boilerplate” clauses or the “usual verbiage” in order to avoid having to be involved with situations that they have gritted their teeth over and reached an agreement. A weary or inexperienced attorney might reflexively reach for form language that he or she used in previous settlements. Even worse, they may ask for the same type of generalized language from another attorney who has not been involved with the parties and the issues in dispute.

Here’s why that is a recipe for disaster in many situations.

Continue reading

Landlords Lose Remedies Or Do They? – The Lockbox

 

Most commercial landlords are familiar with the concept (or actually use) a bank “lockbox” for deposits of rent and other lease charges from tenants. The process is simple. Take for example a shopping center development. Instead of the landlord receiving checks by mail or other carrier, tenants deliver their payments directly (usually via via ACH) to a bank that holds all of the payments in a single account.

The advantages of this system are numerous:

  1. Landlords don’t have to spend the time or the $$ to collect and account for all of the monthly or periodic payments owed by the tenants;
  2. Although there is generally a fee charged by the bank for this service, it is usually far outweighed by the cost of employees or third party collectors doing the same job; and
  3. The bank provides a clear timely report of which tenants are making payments, short paying, or not paying at all.

So, assuming you are a landlord with multiple properties and/or numerous tenants, why would you not choose this method of gathering and accounting for rents, TICAM  and other payments?  Unfortunately in many states if a rent payment is deposited, it is considered to be accepted by the owner and constitutes a waiver of all defaults. In addition, most banks will not block individual tenant’s payments, short of closing the account entirely. Not a good solution for the landlord, especially when the anchor tenants are paying through the lockbox as well.

So what do you do if you don’t want to block your lockbox?

In many situations landlords and their attorneys have attempted to come up with creative solutions to this problem, including:

1. Attempting to reverse the payment through the bank;

2. Sending the tenant a replacement check in the same amount with a letter reiterating the default is not waived and landlord maintains its position that it can act on its remedies;

3. Changing the notice address for payments to a P.O. Box or even better, someone’s office; or

4. Reporting to the bank that any payments received by the defaulting tenant are potentially fraudulent.

Which of these have been successful?  Under the first scenario, most tenants have successfully argued that once the check is negotiated by virtue of deposit into the lockbox account, the receipt of the same and waiver cannot be undone.

In the second situation, tenants have either refused to accept the payment back from the landlord either by ignoring certified mail or hiding from the FedEx person!  Thus, the tenant can frustrate the attempt to avoid a waiver.

In the last scenario, even when there has been a history of bad checks issued by a tenant, most banks will not investigate checks sent by the offending tenant before they go directly into the lockbox deposit. This is also dangerous, as a savvy tenant could argue that the landlord is setting them up to default by creating a mechanism by which they can evict or collect additional monies per the remedies section of the lease.

For tenants who are concerned about getting their rent in on time and in full, the third situation may work. However, a canny tenant would continue to send the rent to the lockbox. Although that may be technically a default of the notice paragraph in the lease, courts have held that it does not undo the waiver of the default by the owner.

Is this the end of the story?

Maybe not.

Some courts have ruled that waiver must be a conscious choice regarding legal rights as to the tenant. In other words, the landlord must have actual knowledge that the payment is being made and intentionally not take action to allow the check to be accepted.  In the case of Manufacturing Co. v. Building Co., 97 S.E. 718, the North Carolina Supreme Court stated that “[w]aiver must be manifested in some unequivocal way, and to operate as such, it must in all cases be designed, must have so acted as to induce the other to believe that he intended to waive…”.  The case also cited Justice Holmes’ classic definition of the doctrine of “election” from Bierce v. Hutchins, 205 U.S.340, that “[e]lection is simply what its name imports; a choice shown by an overt act , between two inconsistent rights, either which may be asserted at the will of the chooser alone.”

In the lockbox situation, an affirmative election to not waive the tenant’s default (by returning the payment and stating in writing such election and intent not to waive the default), the landlord would arguably be able to maintain an action for eviction, collection and other damages despite the tenant’s position to the contrary.

Business Decision or Rely on the Courts?

One final point.  Aside from the legal outcome of accepting lockbox payments, landlords may want to consider shutting a lockbox account down temporarily in order to have rock solid grounds to oust a tenant. Consider the situation of a large tenant in a industrial park who has defaulted repeatedly and the presence of a more solid and attractive replacement tenant for the same space. Foregoing the rent payments for a month or two may make more long term business sense than accepting the rent from the defaulting tenant and potentially losing the replacement business in the process. Obviously this is not an easy decision to make in most cases and lender restrictions and other factors could easily complicate the decision.

Maximizing Results in Real Estate Transactions: How To Plan, Where to Save and Where to Spend? (PART 1)

controlling costs

How many times have you or your company looked back at a transaction and winced at some of the expenses and fees paid to close the deal? Wondered aloud whether the performance of your team and associated vendors and other professionals was properly analyzed and carried out? Thought about how the deal could have been structured more efficiently and each step discussed more thoroughly?

These are just some of the questions commercial real estate professionals struggle with as they try to become more productive, efficient and profitable. As with any business transaction there is no magic answer or manual for how to get the most out of every project while controlling costs and staying true to the goals originally set for the sale, purchase, lease or other transfer of real estate interests. However, these issues arise in every economic cycle, transaction and business regardless of the circumstances.

This will be the first in a series of posts analyzing how real estate companies and related businesses can work together to achieve the goals for each project, while controlling costs and maximizing results. This week we focus on the front end ideas, goals, initial planning and lining up the team to best work on the deal. Continue reading

SPECIFICITY IN LEASES: When is too much detail a problem for the parties (or even in this article)?

specicity 2 specific 3

No one wants too much or too little. But where is the Goldilocks’ solution? Err on the side of too much rather than too little?  Stick to the amount determined by local business standards? Somewhere in the middle? Enough to get the deal the deal done?  Hmmmmmm….

In order to analyze this situation, let’s imagine subpoenas were issued for a representative of each of following players in a lease negotiation to given confidential testimony on this question, including their overriding goals. Each representative is given pure anonymity and the prompt to be as forthright and open as possible. The investigator interviews each person and then reviews his notes. A clear answer does not appear. Rubbing his eyes, he looks at the testimony again: Continue reading

You Mean I Cannot Evict A Tenant If It Is Unfair?

unfair eviction 4

Yes, this seems strange doesn’t it.

However, the North Carolina Supreme Court has determined this can be the result in certain circumstances.  In Eastern Carolina Regional Authority v. Lofton (No. COAA14-212), the N.C. Supreme Court found that in an eviction case based upon criminal activity of the tenant’s guest, the tenant could not be evicted because it was her involvement in the basis for the eviction would be “shockingly unfair of unjust” or “excessive” and “unreasonable.”  One could easily argue this was limited to the residential nature of the case (domicile), but the N.C. Supreme Court based its ruling on the basic four criteria that serve as a basis for ALL evictions, commercial or residential. Continue reading

Just Work With Me! – Best Intentions and “Waiver Creep”

work with me 2

When is it a good idea to keep working with a defaulting tenant?

How many times (even during a robust market) have landlords considered and perhaps acted on a tenant’s request to grant them abatement, deferrals and other concessions in order to preserve the relationship, avoid vacancy, make their lender happy and keep the rent coming in? More often than you might imagine.

Although there is clearly self-interests on both sides in the decision to allow the tenant to pay partial rent or defer overdue amounts under the lease, often landlords and tenants enter into such discussions with the best intentions for all involved.

Yet, even the most benevolent agreements can lead to negative consequences down the road. Continue reading

Growing Pains – Issues Surrounding the Construction or Re-Devolopment of Commercial Properties

Growing pains 3Growing pains 5

Let’s face it.  In the post recession market, Developers and Owners are ready to look for opportunities to build, expand, alter and modify their properties.  Although likely not as robustly as to pre-2008, there is retail, office and industrial re-development and expansion happening as we  read these words.  And with this change in the market comes an inevitable challenge between Landlords and Tenants as to their rights and obligations as new development moves forward and existing product is modified, altered and expanded.  The focus of this post is to delve into the issues relating to what these parties should discuss, plan for,  and work through during the growing pains.  One of the struggles is to determine the rights and responsibilities of the owner and the tenant when a dormant or unimproved property experiences growth and (yikes!) prosperity. As reflected below, change may not ultimately be a problem for either party.  Although there is a lot of advice for tenants, landlords can certainly benefit from this discussion. Continue reading

CAM Reconciliation Time – 10 Things To Remember!

CAM picture 1

It’s that season again. The owner and vendor costs have been received. Next, time to work through the Common Area Maintenance (CAM) costs, calculate allocations, send notices and so on…. What are 10 things that owners/property managers and tenants should remember and act on? Continue reading

What’s Ahead For CRE in 2015? – Predictions, Predicaments and Predilections

Future 2

2015 is here and the real estate market is back! Or is it? The beginning of the year is always a good time for reflection and planning for what may lie ahead for retail, industrial, office and multifamily properties;  lending; the economy; construction; investment;  and development. Here are some thoughts on what 2015 could look like. My local lens is Charlotte N.C., but I would be interested in feedback from others areas of the country as well.

Certainly this list is not scientific or the result of past reflection on future time travel, so weigh in!  Continue reading