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.

Don’t Ask, Don’t Add?

Should you add or suggest a modification to a contract or lease when it is not to your client’s best interest? No? Never? The answer is Yes and here’s why.

Competing Motivations and Goals

In the process of negotiating a business transaction, many attorneys are left to ponder why their opposing counsel or his or her client did not suggest (or even demand) a contract term that is clearly to that side’s advantage, or even failed to discuss an important concept that affects all parties to the agreement. As an advocate for the client, one might stay silent in order to preserve the benefit of the absence of such matters. Certainly it is a “win” for  your client?  And it won’t hurt your relationship with them to happily announce that the opposing party and his lawyer “left one out that will hurt them and help us!”

However, as an adviser to your client, and for their long term benefit, there are many instances where leaving out a key substantive or procedural term will end up causing more problems than raising the subject and negotiating terms that both sides can agree to.

For the purposes of this post, I am not talking about core terms such as consideration, proper identification of the property location, the term of the agreement, notice addresses etc. No one benefits if those are left out or are hopelessly ambiguous as the enforceability of the agreement is put in direct peril.

When Does This Make Sense?

Suppose you are negotiating a 10-year triple net retail lease which includes boilerplate language for common area maintenance charges to be paid on a monthly basis by the tenant. However, what if the form lease is silent AND the tenant does not request language that provides procedural and substantive guidance for reconciliations and/or review rights?  That is no skin off the Landlord’s back, right?  As landlord’s counsel, remain quiet on that term and move on to the next negotiation point. Big win for the owner, right?  Arguably not.

When the tenant wakes up after year 1 of the lease and determines that it has not received an accounting of CAM charges and the net owed by or due back to them,they will likely demand that landlord provide this information. Landlord then points to the lease and shows there is no obligation to provide any reconciliation. Tenant disagrees and their counsel says landlord has a common law (or in some States statutory) duty to provide an accounting and return any over paid CAM fees per the tenant’s pro rata share of the total square footage of the shopping center.

At that point, there is at best a dispute, if not a threatened lawsuit against landlord for unjust enrichment and potentially other claims. Sure, landlord may prevail in litigation.  But what if they don’t? And what if the Court deems the entire CAM obligation unenforceable? What about the relationship status of the parties for the next 9 years?

What happened to your big win?

Other Examples Where Lack of Terminology or Silence Can be Harmful

  1. Relocation Rights and Obligations – what happens when the landlord has no mechanism (outside of eviction) to move a struggling or holdover tenant to a vacant space to make way for a replacement tenant who is paying 200% higher rent and taking more term?
  2. Rules Regarding Recording of the Lease – if nothing is stated what happens when the tenant records landlord’s full lease in the public record?
  3. Parking Rules – how many spaces is tenant allowed? what if they fill up the parking lot with a special event?
  4. Holdover Status and Increased Rent – landlord may be at the mercy of the common law as to what type of tenant they are dealing with and how much rent tenant owes per month is anyone’s best guess? How long will it take to evict them when the replacement tenant comes along?
  5. Right To Accelerate Rent – as landlord, do you want to be left with the right to seek only past due rent as a remedy? where does landlord’s leverage go if the amount owed is accruing one month at a time?
  6. Landlord Breach and Tenant Remedies – if not spelled out, both parties may be at the mercy of that State’s law on the issue instead of what the parties intended.

Conclusion

Think carefully before you advise your client to ignore these issues even where there might be a short term gain. The long term effects of such an action may be painful and costly!

“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” – Abraham H. Maslow

 

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

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

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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

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

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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!

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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

Best Wishes For The Holiday Season And Some Things To Think About….

For this part of the year, REDD is celebrating with some trepidation (mostly caused by attorneys and accountants) the end of  2014 and  a bit of food for thought. To begin with, my apologies for the strained rhyming  below and if I have may have left some folks out.  But now, without further ado…

working during holiday 2

Twas’ the last days before the end of the year and all through every Landlord and Tenant house, people were tucked in their beds, not stirring and there was no mouse – or at least one that didn’t work without IT help:

1.  The budgets for 2015 were finished (we think) and put away with care,  for all of us to tussle over next year!

2.   The Tenants were flush with optimism over Black Friday and Cyber Week profits without dread; while Landlords dreamed of big Tenant gross sales like lollipops in their heads;

3.   The vendors were paid in full in hopes that all  begin fresh in the New Year, we think….Did we settle up with everyone and iron out all the kinks?

4.   TICAM estimates had been sent with care to every Tenant everywhere, for them to open and hopefully not despair.

5.    The accountants and tax folks have been presented with every necessary document and reporting (P.S. they work all week with keyboards a’ clicking!).

6.   Everyone was joyful for the year that had passed and 2015 to follow with great promises to last?   Landlord said : “I hope sales get you to the place you pledged you would be.”  Tenant replied: “how can I have a successful year with internet sales and no fee!”

7.   And as the Landlord lay a finger across his nose, the Tenants exclaimed  percentage rent ratios were too low!

8.   Franchisors sat in their command centers ready to react to their Franchisee’s reports on customer traffic and year end sales. By the way, do not forget your franchise fee and please, please no tall tales!

9.   Assignors sat back with good tidings to all,  hoping that their Assignees were kings of each mall.

10.  Brokers were huddled with their plans for next year; to make every transaction work perfectly clear.  Meanwhile as they looked at holiday meals, a fat man landed down the chimney with new deals!

11.    The Contractors opened presents with glee, hoping new construction or TI would be what they would see; or at least a major upfit.

12.  The Developers were also asleep in their beds, as new projects danced in their heads!

13.    The Investors were last ones to bed, no sense of magic stuck in their heads.  P&L statements were the main concern, so large profits could be earned!

And to all a good night, let none of you have a fright. May the New Year bring you good cheer and a prosperous year…..

Best Wishes and see you in 2015!

CO-TENANCY – What’s In Your Crystal Ball? (PART 2: Key Issues and Related Dilemmas)

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In the last post, we discussed the basic concepts and procedures involving  co-tenancy in commercial leases. We also threw out some questions about how all of this plays out in the current real estate environment.  This week, we will delve further into important issues for landlords, tenants and their lenders to consider when grappling with co-tenancy at the drafting stage and after the lease is signed. In addition, we will suggest some answers to the questions from last week…. Continue reading

CO-TENANCY – What’s In Your Crystal Ball? (PART 1: the basics)

crystal ball 5basic rules 2

As the retail shopping experience has become more complicated and intertwined between Landlords, Tenants, Lenders and Consumers, so too has the use, scope and shape of “Co-Tenancy”. This is the first of two posts that will examine the ins and outs of the Co-Tenancy concept. We will examine: (1) the meaning of the term and its three generally recognized forms; and (2) key concerns Landlords and Tenants have with this animal. Continue reading