Friday, December 5, 2014

Beware Non-Enforceable Real Estate Options

Real estate options can be tricky, and it’s not uncommon for an organization to NOT have an option that they think they do. To be enforceable, an option must meet several criteria. If they don’t meet the criteria, they won’t hold up and the grantor will not be obligated to honor them. As examples, two of the key criteria for an option are that it must (1) clearly define what the option governs and (2) determine a price or an index-able mechanism for establishing a price at the time of option execution.

Justin Daniels, a real estate attorney I’ve found to be a very reliable resource, did a great job of illustrating a “gotcha” you might not know about with real estate options. It’s a real-world horror story of what can happen without professional representation, and it provides a free education to us all.

Here’s the story in Justin’s words:

“Blackberries, text messaging and instant messaging have resulted in a culture that worships speed at the expense of precision. I see this effect every day when people explain transactions to me that they wish to pursue, only to leave out important details that they either had not considered or had in their head and but did not include in the email.

“I recently encountered a court case that demonstrates this principle and its disastrous consequences. A landlord and tenant hastily entered into a lease where the tenant was leasing premises defined as approximately half the available office space. The parties further agreed that the tenant would have the right to purchase the property. In their haste, however, the parties failed to define what ‘property’ meant. Later, when the tenant exercised its right to purchase the property, the landlord refused to honor the option. The parties predictably ended up in litigation over the word property.

“After both parties expended significant sums in legal fees, the court of appeals determined that the lease defined the ‘premises’ but the option to purchase was for the ‘property.’ The term property, however, was not defined anywhere in the lease. The court concluded that the option failed and was not enforceable because it did not define the property subject to the purchase option.
If you’re interested to hear more about this particular case or need to find a knowledgeable real estate attorney, give me a call and I'm happy to connect you to Justin. He does a great job of keeping me current on the latest developments, enabling me to help clients avoid ugly surprises.


Friday, September 5, 2014

Negotiating: Let them be the Alpha Dog

Ever had to work with someone who had to be the alpha dog? I have... I used to see it a lot when working alongside really smart engineers (two lifetimes ago). I've also seen it in negotiators. Got a good point? They'll add to it. Make an incomplete statement... they'll "fix" it. It's not everyone, but they're out there. It used to wear me out and infuriate me.

But then I figured something out: In a negotiation, it's great to LET them be the alpha dog.

Think about it. If you oppose them, they're going to oppose you back. They'll dot every "i" and cross every "t" because they know you'll call them on it if they don't. But if you let them know that you respect their capabilities - if you LET them be the alpha dog - they feel secure. And when they feel secure, they loosen up. And when they feel really secure, they tell you about themselves and about their side of things. They tell you all kinds of helpful things.

Why in the world would someone tell their negotiating adversary things that help that adversary? Because the same compulsion that drives them to become the alpha dog drives them to retain the feeling of OK-ness that you've allowed to develop. They've become addicted to feeling large and in charge, and (think about it) the only way to stay in that position is to continue to help you see more of their capabilities.

Ask them a how-to question and they'll answer it. Tell them you're struggling with something and they'll help you solve it. I know it sounds crazy, but it works. I spent four years of my life in an electronics design lab with a bunch of really smart guys who reveled in the opportunity to help me (once I quit trying to compete with them). I've negotiated corporate deals with people who I routinely told how I dreaded their negotiation "beatings." And I've had adversary's real estate agents tell me how to overcome an obstacle on their client's side of the table. Why? Because I've let them all be more "OK" than me and then asked for their help.

Now don't get me wrong... I'm not advocating that we present yourselves as nobodies or someone to be taken lightly. If we're to be effective, people must know that we're capable and willing to make tough decisions. They need to know that we ARE their point of contact and that we ARE running the show for our side. But we're doing so humbly. And, more importantly, they perceive that we regard them as being very good at what they do and we respect their opinions and insights. Call it Dale Carnegie meets Columbo.

Does this approach work with everyone? Yes... it does. If they're like you and are more concerned about getting the job done than with being on top, they'll appreciate knowing that their expertise is recognized and valued and things will run smoothly and efficiently. They may even give you a few behind the scenes glimpses when things get stressful. And if they are the alpha dog type, they'll love working with someone who makes them feel important and they'll help you do your job as you both move towards the goal line.

Here's to your success!