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Young Lawyers Network: Negotiating the Commercial Real Estate Deal – A Tribute to Sid Saltz

Sidney Saltz, an active leader of the Section of Real Property, Trust and Estate Law, died in October. Sid was a giant in the field of commercial leasing. He was a prolific writer and teacher in the Section and the Chicago Bar. He authored numerous articles in Probate & Property and wrote From Handshake to Closing: The Role of the Commercial Real Estate Lawyer, among other books for the Section. He mentored and worked with many of the current leaders in the Section. As a tribute to Sid, this issue’s YLN column focuses on negotiating the commercial real estate deal and presents material from the third edition of From Handshake to Closing: The Role of the Commercial Real Estate Lawyer, which the Section published in 2019. See https://bit.ly/3n94ByR.

All Experience Is Valuable

Your success in negotiating purchase and sale agreements, leases, and loan documents for commercial real estate transactions is a function of how many deals you handle and what degree of involvement you have in such transactions from beginning to end. With experience comes expertise.

The General Approach

The goal of any real estate negotiation should be to air the issues, discuss them as dispassionately as possible, and reach a conclusion.

A Useful Strategy

A challenge for commercial real estate practitioners is when to fight for a deal point and when to let it go. As Sid would say, “[i]f you don’t have a good reason to say ‘no’, say ‘yes.’ If you have a good reason, explain it. If you cannot agree, try to find a compromise position.” It may be that after you employ that strategy, the parties may still not be able to agree on a deal point. If that is the case, involve the client or broker. The client or broker may be able to think of a compromise you had not envisioned, or they may permit you to concede the point.

Pick Up the Phone to Close the Gaps

In a typical real estate transaction, counsel for each side exchange drafts of the agreement that is the subject of the transaction several times before the parties pick up the phone. More often than not, the parties hope they can take care of the transaction via e-mail. A brief phone call, however, can save you a lot of time and your client a lot of money. Sometimes it is advantageous to make sure there is agreement on the major points before advancing to the minor items.

Know Where the Deal Should Land

Know your client’s goals in the transaction. Having the major “deal points” in mind can serve as guideposts in your negotiation of the transaction. A letter of intent will usually lay out the major deal points in a lease or purchase transaction. In a financing transaction, a term sheet will spell out the significant business and legal terms.

Never Belittle Opposing Counsel

Do not make off-putting remarks to opposing counsel that will make the negotiation more difficult in the future. Statements such as “That is absurd” or “That is the dumbest request I ever heard” will not put you in anyone’s good graces. If anything, it will make the attorney on the other side more pugnacious. The parties on each side of the deal may not always have cool heads, but their attorneys need to make an effort to be as agreeable as possible for the sake of the deal.

Never Dismiss Opposing Counsel’s Requests

Answers such as “We never give that” or “Well, I’ve never heard that one before” or simply “Denied, what’s your next point?” belittle opposing counsel, whose points should be responded to respectfully and with sound argument rather than flippantly, even if you think that the point is silly and, frankly, pointless.

Do Not Take Advantage of Opposing Counsel’s Mistakes

Everyone makes mistakes. No amount of careful preparation, drafting, analysis, or discussion with one’s clients and their brokers will eliminate all errors. We must do the best we can to avoid errors, and we need a lot of luck to avoid having errors that cause adverse consequences for our clients and ourselves. It may be tempting to take advantage of the errors of opposing counsel. Do not do it. As the golden rule states, “Do unto others as you would have them do unto you.” Helping others—even when it may not benefit you—will quickly earn you a good reputation as someone that people want to work with.

Do Not Be a “Deal Killer”

No matter how strongly you may feel that a deal is not in your client’s best interest, it is not your decision to make. You can advise your client, explain your view, and why you have reached it, but the decision is always the client’s. It is the client’s money; and the client, not you, will have to live with the consequences of the decision. Present the best legal advice you can offer, but do not get in the way of a deal that the parties want to make.

We hope the above pointers will assist you in your practice. For more in-depth mentoring from Sid, please read From Handshake to Closing: The Role of the Commercial Real Estate Lawyer. Whether you are a seasoned practitioner or just starting in your legal career, the book offers great value for your practice.

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