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My experience highlights how simple and easy it seems to rely on the representations of people who ask for your money but give few details. Unfortunately the details usually separate the good from the bad investments. I recently represented a client who got involved in a transaction where they did not realize they signed half million dollar guaranties while ceding control of the real estate project to a third party who signed no such guarantee and therefore, had no skin in the game. Simple due diligence would have highlighted these potential problems and the client could have made an informed decision. Instead they are dealing with a stressful situation that has undermined a once strong friendship. The moral of story is trust but verify the details of the proposed investment. If you don’t understand something don’t be afraid to ask the hard questions even if you feel reluctant to do so because it’s a friend or you really want to believe what you are being told. Failure to do so typically results in a hefty legal bill and time and attention away from your business to clean up the mess.

As always your trusted resource for practical legal advice.

While litigators litigate, on the other hand, smart counsel ask these questions and help figure out if litigation makes business sense. Business owners usually regret the decision to litigate when they get caught up in their hard feelings over not being treated fairly. At some point in all our lives, business partners will not live up to expectations and those who approach these issues based on the facts and not emotion make the best decision. In all my years practicing law, the agony of the interminable litigation process overshadows the feeling that justice was served even in ultimately successful lawsuits.

This is a short term outlook that has become so pervasive in our society that we forget it usually costs us more time, money and effort in the long term. Instead, take the time and make the effort to identify and choose the right lawyer. If your lawyer won’t invest the time to get to know you, your business and your industry, why would you expect them to provide you first rate counsel when you really need it. Many clients I have worked with over many years actually save money on legal fees because I know them, their main agreements, customers and businesses. The investment you make now hiring the right lawyer pays off with better and more efficient counsel when you need it in the long term.

1) Identifying the buildout completion date and the penalties for landlord’s failure to timely deliver. These are typically 2 days free rent for each day’s delay and if such failure lasts beyond 30 days the right to terminate the lease.

2) The right to assign the lease to a creditworthy tenant and a release from any further liability after the assignment.

3) A cap on common area maintenance (CAM) charges or a cap on the subset of these charges called controllable expenses (i.e. the expenses that can be bid out like landscaping, management company, etc.)

In my experience, these provisions can critically impact a tenant’s bottom line yet many times they are not negotiated at the outset along with the base rent, term, and other financial terms. The problem that arises is the landlord will not easily budge on these issues and the tenant is invested in the lease process and is reluctant to walk away from the lease after having spent so much time negotiating the business terms. The CAM cap issue, in particular, can significantly impact tenants in this economy where landlord’s are hurting and looking for all kinds of ways to pass along CAM charges to tenants. Don’t assume a landlord’s history of fairness will mitigate the concern here as I have seen property portfolios sold to new landlord’s in the last few years who overpaid and now need to recoup that investment by foisting CAM costs on unsuspecting tenants. In short, these three issues appear in almost every lease and tenants should negotiate them at the outset and not wait until they receive the lease.

As always your trusted source for practical legal advice

Due diligence may seem trite and monotonous but it is essential to making sure you receive what you expect. Do the property revenues justify that purchase price? I recently reviewed a survey on a real estate transaction with a seller who owns real estate all across the southeast. The survey clearly showed that the seller built storm water and sewer lines that traversed the adjacent property and there was no easement for those lines. If my client purchases the property without the easement he takes the risk that the adjacent landowner may demand that my client remove the pipes or pay an exorbitant price for an easement. How would you feel spending 5,000,000 to close this transaction and then find out about this problem. A mere hour spent reviewing a survey identified this problem.

There is no substitute for good old fashion due diligence. In my experience those who really pay attention to the small details become successful businesses. Those who don’t usually call my office after the fact upset at others when they simply need to look in the mirror for the culprit of their misfortune.

As always your trusted resource for practical legal advice.

Most lease boilerplate contains a clause that says the lease supersedes any prior discussions that took place prior to executing the contract. This means that you need to make sure the contract accurately reflects the party’s intent. If a problem arises later, in most instances, the contract language controls and prior discussions are meaningless.

Don’t assume the lease merely memorializes your agreement, more often than not, you will find there are important details that need clarifying. For example, you may have understood you were receiving a reimbursement from the landlord as your tenant allowance. If the final lease states that landlord does the build out but the tenant reimburses the landlord that language will control and the prior discussion is meaningless. That is why its so critical that you make sure all the letter of intent items are properly memorialized in the lease.

Johnny Isakson at FMLS Tradeshow from Brad Nix on Vimeo.

Video Courtesy of Ben Carter.