Do You Take Shortcuts When Negotiating on Behalf of Underfunded Clients?

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First, thank you for all of the comments and observations you posted to last week’s blog entry. There were more than a dozen other valuable comments made to various Linked in Groups as well. Ruminations is about provoking discussion and, without your participation, it wouldn’t be a discussion. All in all, a typical posting now sees about 20 comments.

This week’s musings are primarily addressed to attorneys, but also are aimed at anyone else who handles a transaction for someone else, such as an employer or customer.

Where budgets and other resources are limited, how do you work within those constraints? Pejoratively asked, “Do you cut corners”? The constraints are real – there isn’t always “enough” time before a deal needs to be finished, and each client gets to decided for itself how much money it wants to spend to get the job done. When it comes to the “time” constraint, externalities are a factor. There is always “another” party to the deal. That party has its timeline. Further, the marketplace imposes deadlines, some of which may be softer than others, but they are still deadlines. When it comes to the “money” constraint, the client has more of a say, often the dominant or exclusive “say.”

Now, to a leasing example that goes beyond the obvious “condemnation provision” where, absent a known factual situation or a blatant departure from traditional treatment in a form lease, you aren’t going to spend any time. Here’s the question: “Do you advise your client of the wisdom of commissioning a title search and review”? For those who don’t know, larger tenants expect that such work will be done. Take that as an a priori concept – take that to be a fact. That’s why Ruminations is asking this particular question: “Do you advise your clients that ‘smart’ tenants see a title search as valuable?”

For those few of you who raise the issue, how do you advise a client who responds: “Is it worth it? What are the risks of not having that work done?” And, after you answer the client, how much comfort can you take in a decision made by an unsophisticated client (to this “title insurance” example or any similar example)?

Now, I know that most readers (but, not you) are saying: “Are you crazy; who orders title work for an $800 a month, five year lease?” Well, not the tenant’s attorney in Davin, L.L.C. v. Daham, 746 A.2d 1034, a case decided by the Appellate Division of the Superior Court of New Jersey in 2000. That Court held that the trial judge erred in granting a summary judgment motion submitted by the tenant’s attorney and sent the matter back to the lower court to determine whether the tenant’s lawyer should have ordered a title search in that particular instance, a lease of a small bagel shop. This holding was made despite the fact that one expert opined that “ordering title work in this matter would have been an extraordinary step and one that is not ordinarily taken by thousands of other attorneys.” Thus, even if you were to conclude that “no one else is doing it, so why should I,” you may still be subjecting yourself to judicial scrutiny instituted by a tenant who has received news that its title is not what it thought it would be.

There is no need for us to list other examples of things that commonly are skipped or handled on a “short shrift” basis when the money budget or time budget, or both, are scant. Every reader is capable of making her or his own list. Start with what you do when you have a large and cautious client, and then circle those things you don’t do when the client is unsophisticated and on a very small budget.

Here are some rules or maxims (call then what you like) to keep in mind:

• The care exercised by the attorney must be commensurate with the risks undertaken and tailored to the needs and sophistication of the client.
• Lawyers owe a duty to their clients to provide their services with reasonable knowledge, skill, and diligence.
• An attorney is obligated to exercise that degree of reasonable knowledge and skill that lawyers of ordinary ability and skill possess and exercise.

Here’s the trick. First, you need to have an appreciation of what is at stake. Any examples would be fact-specific, but here’s an example. Is your client contemplating putting in expensive improvements? Then, you have to review the lease just as thoroughly for a guppy as for a whale. Then, with the issues you’ve spotted, you need to tell your client about them. Don’t look to Ruminations to tell you where to draw the line. That’s a matter of judgment and it depends on the client and the stakes. This is an art, not a science (unless, perhaps, you’re wrong – but that’s for someone else’s blog).

There is a rub. The very act of advising your client of the issues can step over the client’s money line or the time line.

Before anyone jumps up and down and suggests that the main thrust of this posting is to look at the question from a CYA perspective, here’s a thought to be shared. The best form of CYA is to do right by your client (or employer or customer). CYA doesn’t even come into play when you’ve done the right job because it then doesn’t matter that everyone can see your “A.”

This question begs for comments. Even a purist has to concede that the situation posted, like all others, requires compromise. Even if one were to (in our view, incorrectly) deny the “all,” you’ve got to concede that the small-size client’s small lease isn’t getting as comprehensive a negotiation as would a lease for Apple or ExxonMobil. So, what do you suggest? Those who fear revealing their approach to preserving a client’s scarce resources, because doing so would make them appear “less than careful,” are welcome to offer examples of how they’ve seen others approach the dilemma.

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  1. When working with an unsophistocated client (whether well funded or not), I take the time to walk through the lease from start to finish to discuss what the various provisions cover and how they affect their business. This normally takes 1 to 2 hours, but is usually determined to be time well spent (and my CYA is completed). Quite often the client had not fully comprehended the interrelationship between the business and legal aspects of leasing. Thus, at the end of the process, we are able to highlight those areas of most concern to the client and decide which to focus on and which to treat lightly. This includes how much time and money will be dedicated to what are determined to be the most important issues. I also keep the onus on the client to resolve the business issues so as to limit the amount of time I spend having to work on them with the Landlord’s attorney. If I have to eat an hour or 2 of time, I know it has not been wasted and I usually have cultivated a better relationship with my client.

  2. Good post Ira. When a client sets the rules on how much it will spend to have a lease negotiated, that is tough and we all face that sometimes. We also self-impose limits (i.e. adjustments to a billing) lest we send the client too big of a bill, no matter how justified it would have been. That’s the quickest way to lose a client. Bottom line, one shouldn’t cut corners. Condemnation aside ( unless that clause is outstandingly bad) I would cover everything on the first pass because one never knows – the other side may agree to it right away (“if you don’t ask, you don’t get”). If you get push-back, then the vetting process with the client begins. One should advise the client, based upon one’s experience, about what topics to fight for and which ones to let go and why. As long as that conversation is documented, than your “A” is covered. After the vetting has been performed and the dance with the other side begins in earnest, one can only hope that the other side is sophisticated enough because I find that deals are finished more quickly with one who knows what he/she is doing and moves right to a reasonable compromise position. But once you’ve undertaken the task of representation, one has a duty to see it through in a professional manner even if it grinds you down to a minimum wage level (G-d, forbid!). On the subject of a title search, I don’t usually recommend it in a shopping center context because that work has already been done and the landlord will usually share its policy exceptions with you. For intervening encumbrances, the risk is usually very small and one will have to rely on the covenant of quiet enjoyment if it’s not. Unless of course you have an ongoing deal with a title company who will perform a search for a modest cost. For deals other than shopping centers I would always recommend the search.

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