Belinda Solomon, a partner at Brecher LLP talks to us about why legal advice is important when acquiring an office.
This may seem astonishing to you all. But can you believe that there are some clients who simply do not listen to advice or would prefer to save money and take a risk? I know! To prove the veracity of this astonishing claim, I am going to give you a taste of the sorts of things that can happen if you adopt that approach.
Let’s start with conditional contracts. If you are buying or leasing a property where planning is needed for your particular use and the contract is conditional on the seller/developer obtaining that planning, if the planning does not work for the development/use you want, this is a fundamental problem.
If conditions are included in the planning consent it could mean you cannot use it for your business or your operation is restricted or that the cost of compliance makes the property unviable.
Consequently, you should think very carefully about limiting the list of unreasonable conditions and double carefully about getting rid of any “sweeper”.
I included a sweeper in a contract I was amending for a buyer which said that they could reject the property if the planning condition made the development or operation of the property unviable or uneconomic. That is a sensible precaution, isn’t it? What occupier or developer would want to be in a position of having a property they could not operate from or develop?
I was told to delete that clause as the clients decided they did not need a sensible precaution. And guess what? They are now trying to shoehorn their dreadful planning conditions into one of the other conditions listed (none of which work).The result of this is that they may have to buy a property with a planning consent which doesn’t work for them or alternatively lose their deposit.
THEY’RE NICE PEOPLE!
Another good one is implicitly trusting the people on the other side of the deal. I was told “yes we understand that you are telling us to get everything in writing or attached to the contract but that’s totally over the top. We know these people and they are our lovely new friends. They have promised us they will provide the property to the standard set out in the brochure. Of course they will. No need to document something they will obviously do.
” Well surprise, surprise, they didn’t. This client has been in litigation for 2 years with their lovely new friends over the poor quality of the fittings provided.
Even where the client doesn’t like their opposite number, people are very trusting. It’s probably easier for me being one step removed from the commercial negotiations but time and time again, I tell clients that I think they are being taken for a ride and they don’t believe it. They have face to face meetings where they believe the promises made or cannot credit that their opposite number may be delaying on purpose so that time runs out or they don’t have to do what they are saying. I cannot even remember how many times I have warned clients about these underhand tactics and been told that I am far too cynical.
COST OF BREAKING UP
One of my best disaster stories is about a break clause. Having managed to negotiate only one pre-condition for the break, I was pretty confident that the client would not mess that up. How wrong I was! The pre-condition was payment of rent before the end of the lease. The client was told “Just make sure you pay the next quarter’s rent before expiry of the break notice”. Not a lot to ask really. But the client forgot to ensure that the accounts team dealt with this as instructed and they decided to ask for a breakdown of the rent up to the break date from the landlord. The landlord (probably laughing his head off) failed to reply to this request so the accounts genius did not pay the rent. This was a pre-condition so that meant failure to pay invalidated the break. There were 10 more years to run on the lease of a building they had vacated. You know that joke – “You only had one job”? This wasn’t so funny.
I imagine at the root of these problems is the “It will never happen to me” excuse. I am currently in the middle of dealing with such a one. Acting for a tenant getting a fully fitted-out building from a developer which should have been completed 2 years ago. Note the use of the words “should have been”. Two years ago!!
Nor did the client guess that the delay could be this bad in a million years. Indeed it could be a million years at this rate before it gets done. In fact the delivery of this building is so late that the proposed rent is now well above market rate and the fund guaranteeing the tenant will expire before its 5 year obligation is up. There are many other breaches and faults which I will not bore you with now. On the plus side, they are in a strong negotiating position as the liquidated damages I insisted on for late (late!!) delivery have almost reached £1m.
NEED A LAWYER?
So in conclusion, the greatest error of all – thinking you can manage without a lawyer. It is possible that by some fluke you will manage to avoid the many traps and oddities of the mad law governing commercial property in this country. It is equally possible that you will not and the legal fees for sorting out the mess will cost more than they would have done in the first place!