Five good reasons to call me first
Okay, time to fess up: I am in the business of making money as a real estate attorney. Gee, imagine that! But that does not mean I always get the call from a client or a prospective client, or get it in time. Here are some real life (modified a little to protect confidentiality and all that) examples of clients who should have called me first before doing something:
1. Oh, it was only a letter of intent. I figured you could just fix it up in the contract. Maybe yes, maybe no - and for a variety of reasons. Does the letter of intent say it is non-binding? And even if it does, are there provisions a court may find binding anyway, such as the duty to negotiate and work in good faith? (Yes, it all depends.) And even if you have all of that going for you, there may be provisions in the LOI that, while non-binding, are awfully hard to negotiate against once it is in the "roadmap" of the deal. There are few positions I like to argue against less than, "Why are you retrading us on Provision X? It was in the LOI for a reason." So I end up spending more of your money fighting what could be a losing battle in a negotiation than if I had been involved from the get-go.
2. They said this document was just a standard form. And the check's in the mail, this will only hurt a little, and honey, I swear it is only a cold sore. Uh huh. So that is why you signed a ten year lease with a full personal guarantee for your business even though your financing is still in the approval state? You didn't negotiate an out from that? Oh, your lawyer would at least have pointed it out to you so you'd know the risks. Oh, you are calling me now! I see...well....
3. Oh, I don't need title insurance. The lender has a policy so that will be enough. Nope. The lender's title insurance policy only kicks in if your loan is impaired and you blow out on your mortgage. It insures the lien of the mortgage and gives the owner, in a word, nothing. The cost of a simultaneous issue title policy in connection with a refinancing is cheap. I Often advise clients to get one, especially if a property has appreciated in value significantly. That said, you don't necessarily need a new one if you have a policy in place but the title agency went out of business. The insurance underwriter that issued the policy is still liable for any claims. Each case is a little different.
4. I signed the lease (or the purchase agreement) without calling you because the owner is an old friend. That's great. But what if you sign a ten year lease and the owner sells the property (or worse yet, is foreclosed) during the term. You now have a non-friend as your landlord or a lender that could perhaps terminate your lease. Do you want to be in that position with no bargaining power?
5. The lease amendment just changed one thing and had a page or two of boilerplate provisions. Uh huh. I can think of one instance where "boilerplate" in a lease amendment cost a tenant millions of dollars in extra rent many years later because the tenant's lawyer (who actually drafted the amendment in this case) did not think through an important financial issue or perhaps never read the original lease. (PS: I was not the tenant's lawyer.)
Hopefully this convinces you to spend a modest amount of money up front for some good professional advice, be it from me or another real estate attorney. The alternative? Letting it go, and then risking having your matter falling into one of the above categories or another one. Trust me, the bill you get for being proactive will be cheaper in the long run than the bill you will get for being reactive.
1. Oh, it was only a letter of intent. I figured you could just fix it up in the contract. Maybe yes, maybe no - and for a variety of reasons. Does the letter of intent say it is non-binding? And even if it does, are there provisions a court may find binding anyway, such as the duty to negotiate and work in good faith? (Yes, it all depends.) And even if you have all of that going for you, there may be provisions in the LOI that, while non-binding, are awfully hard to negotiate against once it is in the "roadmap" of the deal. There are few positions I like to argue against less than, "Why are you retrading us on Provision X? It was in the LOI for a reason." So I end up spending more of your money fighting what could be a losing battle in a negotiation than if I had been involved from the get-go.
2. They said this document was just a standard form. And the check's in the mail, this will only hurt a little, and honey, I swear it is only a cold sore. Uh huh. So that is why you signed a ten year lease with a full personal guarantee for your business even though your financing is still in the approval state? You didn't negotiate an out from that? Oh, your lawyer would at least have pointed it out to you so you'd know the risks. Oh, you are calling me now! I see...well....
3. Oh, I don't need title insurance. The lender has a policy so that will be enough. Nope. The lender's title insurance policy only kicks in if your loan is impaired and you blow out on your mortgage. It insures the lien of the mortgage and gives the owner, in a word, nothing. The cost of a simultaneous issue title policy in connection with a refinancing is cheap. I Often advise clients to get one, especially if a property has appreciated in value significantly. That said, you don't necessarily need a new one if you have a policy in place but the title agency went out of business. The insurance underwriter that issued the policy is still liable for any claims. Each case is a little different.
4. I signed the lease (or the purchase agreement) without calling you because the owner is an old friend. That's great. But what if you sign a ten year lease and the owner sells the property (or worse yet, is foreclosed) during the term. You now have a non-friend as your landlord or a lender that could perhaps terminate your lease. Do you want to be in that position with no bargaining power?
5. The lease amendment just changed one thing and had a page or two of boilerplate provisions. Uh huh. I can think of one instance where "boilerplate" in a lease amendment cost a tenant millions of dollars in extra rent many years later because the tenant's lawyer (who actually drafted the amendment in this case) did not think through an important financial issue or perhaps never read the original lease. (PS: I was not the tenant's lawyer.)
Hopefully this convinces you to spend a modest amount of money up front for some good professional advice, be it from me or another real estate attorney. The alternative? Letting it go, and then risking having your matter falling into one of the above categories or another one. Trust me, the bill you get for being proactive will be cheaper in the long run than the bill you will get for being reactive.
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