Does it bother anyone that even after business people agree on the fundamental terms of a deal, it often takes a pretty long time to get an executed agreement in hand? Or, is this only a feeling that long-time practitioners experience? If, in general, old timers hold that view whereas relatively new entrants into the field of document negotiation do not, that might itself be part of the answer.
Let’s start with an understanding of why the prior paragraph ends the way it does. Basically its premise is that those practitioners who have entered the “field” in the last 5, 10 or 15 years only know the situation wherein deals take seemingly forever. Thus, they don’t think anything is wrong. We’re not just talking about attorneys or paralegals or in-house document specialists. This theory would cover the actual deal-making business people as well. If almost everyone on the team thinks a deal usually takes 10 to 14 weeks, then a deal that takes 18 weeks (over four months) doesn’t seem beyond three sigma (meaning, in statistics, that it falls within the range that 99.73% of deals would fall if the median deal takes 12 weeks). Now, if your own experience was that deals of the same nature “used to take” only four to six weeks, you might be working extra hard to get the deal done, to get past the big stones in the road, instead of accepting that there is nothing wrong with four months.
Maybe Ruminations skipped over an underlying premise – the premise that it matters how long it takes to finish a deal. “Time kills deals.” Even when time doesn’t really kill a deal (and we’ll grant that’s the more common case), “time is money.” For example, until a lease is executed and delivered, the tenant (in the case of a retailer) isn’t making sales from the premises and the landlord isn’t collecting rent.
So, what has happened over the years? There isn’t a single answer and the list is probably endless. So, we’ll point out a few things and Ruminations readers can add their own. If you’re inclined to chime in, then go to “Leave a Comment” at the top of this piece to add your own take on this question.
Here’s a start – people are choosing to avoid one another. Yes, consistent with our increasingly “unconnected” society in general, rather than pick up the “horn” and discuss an issue, we exchange email messages. I send you a message by email and four hours later, you respond by asking me what I meant. Then, I explain my earlier email message and the next morning, you tell me “look in the LOI.” So, only 30 minutes later, I say, “I’ve looked at the LOI, but I don’t see where this is covered.” When you get back from your meeting or lunch, you send me a copy of the LOI and it isn’t the same one I’ve been working on. So, the next morning I send you the one I have and you email your client to ask, “What’s going on.” Your client responds pretty quickly by email, asking you how you got the one you have in your file. You don’t understand why you’ve been asked that, so you research your email files and reply that you got it from Sally ten days earlier by email. And, on and on. By the way, you can note that you haven’t even touched the edge of the issue I wanted to raise four or five days earlier and we’re no closer to finishing a deal than we were when I started the email game. None of this is to say that there aren’t many “smart” uses of email to save time and avoid confusion, but that’s not what is going on in 2012. For a longer Ruminations piece on this, click HERE.
Let’s take a vote on who believes that the base documents are getting shorter and more concise as time goes by and as we constantly rework them to make the “tight”? After all, revising and revising your “form” deal after deal should be an editing process in and of itself. Oh yeh! In reality, no one believes our starting documents are getter shorter and smarter; au contraire, the very opposite is true. There have to be a lot of reasons for it, beginning with “it is easier to add to a document, than to edit it.” We’re not just talking adding extraneous provision after extraneous provision (a discussion of which can be found by clicking HERE). By way of example, most lead-ins of “notwithstanding any to the contrary contained anywhere else in this document” are just a way to avoid reading the document so the salient provision can be correctly and completely written in the first place. [Please don’t send us examples where using that phraseology is appropriate and concise, let’s talk about all of the times it isn’t, and that’s most of the time when you find this in the “form” or “base” document.] One thing that happens is that, in a particular deal, a deficiency in a particular provision is quickly fixed with a “notwithstanding” band aid and then that formulation works its way into the form itself. After a fashion, a “simple” form of agreement begins to look like the Internal Revenue Code. You know what we mean – the exception to the exception’s exception. Now, some “innocent” newcomer gets a proposed agreement on that form and says (or should we say emails) “I don’t understand Section 3.2(a),” and gets an email response, effectively asking, “What don’t you understand about Section 3.2(a).” Now, we’re all exhausted, so we take a day or two off from working on the deal, and pretty soon, it’s been four months. All of this is without mentioning how easy it is to cut new clauses from everyone else’s documents and paste them into our own documents – over and over, bigger and bigger.
Another factor is that there has been a real drop-off in graciousness in our society. All right, it might seem that we’re going a little astray from retail real estate law, but someone has to say it. Have you ever gotten too much change and said to the cashier: “excuse me, but I think this change is wrong” Try it. Half the time, you’ll immediately hear, “you only gave me a ten, not a twenty.” What’s the reaction when you say, “no, you gave me too much.” Why do we have our answers ready before we hear the question? Real estate deals are far more like adoptions than they are like divorces. They are happy things – win-wins. If each party tries to figure out how to satisfy the other party’s reasonable needs without being unreasonably burdened, then you get to solutions in one step, not through an iterative process that takes days or weeks.
How about stubborn notions like getting a landlord’s (or a tenant’s) proposed lease or other document in pdf format because the parson who furnished it thinks it will be advantaged by making it difficult for you to embed your comments, in the form of additional or different text, into the lease or other document? Then you ask for a word processing file and you’re told, “That’s not our policy.” So, you say that you’ll just convert the document and warn that you might not find all the little errors and the formatting will be screwed up, and the response is: “uh?” What a way start off – zero on the graciousness scale and, if the message didn’t get through, a couple of extra days converting the document and fixing the formatting as best you can.
Here’s one more for now. After all, these blogs use up electrons and there may be a limited worldwide supply. In that case, we certainly must be reaching our quota. You know you need to negotiate an SNDA, so why do you start the process when the lease is in final draft? Is that to add another three weeks to get the deal done? Why not start with the “third party stuff” right away – order title work, get site plans rolling, get those environmental reports in hand, etc. The party with third-party reports – back title, surveys, sign criteria, REAs, and so forth should begin to gather them immediately and get them over to the other side. And the “other side” should look at the material right away and get the various items in the right teammate’s hands for early review. Here’s a leasing example – how can you review a proposed lease if you don’t have a site plan showing where the leased premises are to be located? Here’s another, how do you like finding out that another tenant has a troublesome exclusive use that it “probably” will waive for you, a process that will take a little negotiation and some time. Do you want to discover the “problem” when you’re ten weeks into your own lease and thinking you’ll be done in a week or two?
Here’s a shout out for solutions that will be so obviously correct that every one of us can begin to pare the process and Get the Deal Done (efficiently and effectively). Tell us what you think by adding your comment at right at the top of this piece.