Ignorance Abounds And It Isn’t Bliss – Faking It Doesn’t Get The Deal Done

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Typically, we avoid postings two rants in a row, and we had planning today’s posting for a few weeks from now. Then, on Thursday, we saw a piece in The New York Times and we wanted to post a link to that article. But, we can’t find the link and can’t find the article. So, we’ll go it alone.

Our subject is ignorance. That’s a lack of knowledge, not a deficiency in intelligence. Even for smartest of people, ignorance gets in the way of making a deal. It interferes with collegial negotiations. It delay the “signing.” It raises the cost of making the deal. And, it happens over and over again. Ignorance is the gift that keeps on giving.

It isn’t enough to know every lease or mortgage or sales agreement clause “cold.” If we are going to make deals happen, we have to know how the world works. To make a deal happen correctly, we have to understand numbers. It boggles the mind that some of us can’t figure out fractions or make percentages add up to 100. As a consequence, we see too many documents with formulas to determine rental amounts or loan payments that just don’t “add up.”

We see vague statements like “the Treasury Rate” without any reference to WHICH rate. If we are going to use outside references, then let’s understand what we are talking about. We see the use of the “CPI” and, in the context used, it is clear that whoever used that reference had no idea at all what the Consumer Price Index really is or how it works. [Readers who don’t remember Ruminations’ posting on the topic might want to click HERE.]

How can there be a fruitful negotiation over insurance requirements if one or both parties don’t have a good grasp on how insurance works? True, insurance is a complicated field of its own, but let’s and admit our lack of knowledge and stop pretending that we know what our insurance provisions say. Let’s commit the time and effort to learn the subject well enough to discuss it in the negotiation context.

The same is true when it comes to condemnation. Too few negotiators really understand how the process works, who is the real party in a condemnation proceeding, and to whom the proceeds must go. Like with many things that negotiating parties should know, there are variations in “the facts” from state to state.

How about real estate taxes? You’ve got to know how a jurisdiction’s taxing scheme works. Does it have a transitional tax scheme? Do you know what that is? If you don’t, big surprises lie ahead to the person or entity that will be paying those taxes.

Is there a rent tax in the jurisdiction? Should a leasing negotiator know?

It is amazing how many negotiators don’t have any understanding of the property in question. They don’t know whether there are basements or upper floors.

Does the tenant have delivery vans? Where does trash go? How do deliveries get made to the premises? Don’t those things matter when you’re doing a lease?

How about the way HVAC works? Or, as we’ve written before, how does electricity get to the premises or what constitutes a structural element?

Everyone of us wants to feel that we know what we are doing. To make that true, we can’t expect “on the job training” to do the job. If you don’t understand accounting, take a course or buy a book. Commit to learning the subject. Look for programs, live, telephonic or on-line that will bring you up to snuff on those subjects where you are weakest.

Look, it isn’t fair to whoever is relying on us to get the deal done if we think we can fake it when it comes to factual things we should know. It is disrespectful to the “other side.” And, it is arrogant to pretend we know when we just plain don’t.

So, for Valentine’s Day 2015, let’s give ourselves a gift – the gift of self-improvement. That’s a gift that keeps on giving and one that can be shared with others.

How’s that for a Ruminations rant?

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Comments

  1. Excellent rant!

    Knowing how ALL of the numbers work (and how they may or may not apply) is paramount if we are to more than adequately serve our clients. And fully ferreting out and understanding the physicality of the property, such as cross-easements, dumpsters, delivery entrances, utility systems, common area definitions, signage, access, parking, co-tenancies, as well as the landlord’s expansion (or contraction), relocation, recapture, termination rights, etc., etc., etc. is a crucial step if we are to fully understand the provisions set forth in the landlord’s documentation and negotiate them to a safe landing.

    After 40 years of lease negotiation, I wish that I knew as much as I SHOULD know and I work every day to increase my knowledge base to better serve my clients.

  2. Amen.

  3. One of your better rants and not verbose. What came over you?

  4. Well done!

    I have often said there should be a Law School Part II covering the practical aspects of the practice of law. The focus of this supplemental learning should be the types of issues you raise, but for the lawyer’s chosen area of practice. Participation should be voluntary, however completion of certain classes or curricula should result in a designation of some sort for the lawyer such as a legal specialization or similar reward. I believe this additional training should be rigorous and not what we have today with our current continuing education farce. Couple this additional training with a campaign raising public awareness and I believe the law profession would regain the public’s respect and the public would be better served by hiring lawyers who are properly educated in their chosen field.

    Keep ringing the bell for us and maybe someday there will be change.

  5. Dennis Hearst says:

    I agree that the best tenant rep brokers should not learn the tricks of the trade but, in fact, learn the trade. That applies especially to the lease document– a lengthy and complex document these days in many cases. The best “in print” resource I can recommend is CEB’s “Office Leasing: Drafting and Negotiating the Lease”. The one I use is for California. It has the history, philosophy, and purpose of the lease– and breaks down each section into the “Landlord’s perspective” and the “Tenant’s Perspective. It gives examples of “best of class” Landlord drafting language and suggested “most fair if highly negotiated” versions of each item. Section 21 is an entire chapter on Insurance, what each party should be concerned about and how to arrive at a fair compromise to properly protect each. It’s expensive– $350.00– but well worth it.

  6. Lowell Peabody says:

    On the money!!

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