Keep your lawyer looped in, ⚖️ save money in lease negotiations

I’ll say it – everyone loves to hate lawyers. They’re right up there with telemarketers and politicians on the list of most maligned professionals, and when you’re scraping together the cash to fund your Capital Budget, legal fees get a lot of scrutiny. And we get it – every dollar counts!

You cannot forgo an attorney for your lease. This has been the subject of numerous other newsletters, and it’s a requirement in our First Location Program. (Don’t believe me? Reply to this email and we’ll happily tell you why.)

You CAN manage your legal fees, but here’s the thing - most people actually do it wrong and end up i) spending more, ii) getting a worse lease, or iii) both. In many situations, our advice is to trust your gut, but when it comes to managing legal fees, ignore your instincts.

Most often, lawyers get paid hourly. So conventional wisdom would lead you to conclude that you should either try to keep the hourly rate as low as possible, or minimize the time spent on the deal. It seems so simple… and yet, we’ve seen both of these strategies majorly backfire again and again.

Here’s how…

💸 Mistake #1: Choosing an attorney based on their hourly rate

We’re not saying you need to buy a Cadillac when a Camry would suffice, but hourly rate is not the most important factor when selecting your attorney – specialization is. While your uncle who does trusts and estates might be happy to look over your lease for a dramatically reduced rate, that’s about as helpful as having a veterinarian diagnose your panic attacks.

Don’t believe us? Here are a few specific ways (we’ve personally witnessed) the train can go off the rails when you use an attorney who is NOT a retail leasing specialist…

❗️They don’t understand the real-life application of the lease terms:

Sure, any lawyer is trained in reading legalese, but how often do properties actually get condemned? What actually happens when tenants default on their lease? Does the sequence of dates and deadlines make sense for a retail buildout? A retail leasing specialist will know these answers without any additional time wasted on research or negotiating issues that have little real-world significance.

❗️They are unfamiliar with retail leases and the norms of negotiating them:

So if your attorney is half the hourly rate of the specialist but it takes them three times as long to negotiate the deal, you are not saving money #math! And this risk is very real – retail leases are long… we’re talking 30-50 pages. And while they’re all a little bit different, they’re pretty easy to navigate if you spend all day every day working on them.

In addition, the more retail leases you negotiate, the more comfortable you are with common compromises… as opposed to reinventing the wheel every time an issue emerges. By the same token, lease negotiations generally fall into a rhythm where each side knows what to expect and when. Let’s call it the art of the redraft vs. the issues email vs. the phone call vs. the all-hands call – these steps are totally intuitive for an experienced attorney, hence less wasted time.

⏳ Mistake #2: Limiting an attorney’s time on your deal

If you can’t reduce the hourly rate, then you’ve got to cut the number of hours, right? Wrong.

Once you start lease negotiations, the attorney is a critical member of the team. That doesn’t just mean they just mark up the lease - they’re also tasked with negotiating the legal and practical terms of the lease as effectively as possible. But, if you limit their scope, drop them from email threads, or cut them out of conversations in an effort to save money, they’re basically blindfolded. They can take orders from you, but they lack the context to suggest solutions based on their expertise. Not only that, but you dramatically increase the risk for miscommunication… which will take additional redrafts to clear up. Which, you guessed it, means more money.

💡 How to actually manage legal fees and get the best results

If you’re not reducing the hourly rate or restricting the hours, how can you actually control your legal fees?

✅ Tip#1: Establish clear communications about your budget and billing

Make sure you understand what your attorney charges, and how often they bill. It’s also fair to ask for an estimate for your total lease negotiation, and to ask for updates when you’re halfway there, etc. Rather than trying to control the costs yourself in a sneaky way, like by leaving them out of conference calls, express your concerns and allow them to make suggestions.

If negotiations are dragging on and bills are piling up, ask yourself (and your attorney) whether there are issues you can let go of in the service of getting a deal done, or whether you are truly at an impasse. Lease negotiations can take a few turns back and forth, but there should be no reason to spin your wheels on inconsequential points or major points when it’s clear that there’s no mutually agreeable solution.

✅ Tip #2: Keep everyone in the loop

By the time you’re negotiating a lease, you will likely have amassed a small team of third-party professionals helping you – in addition to your attorney, you’ve probably got a broker, contractor or architect, and you may even have a manager or other key team members. You will want to loop them in when lease questions concern their scopes of work, but your whole team doesn’t need to know every single detail.

Who needs to know everything? Your attorney and your broker do. You don’t want your attorney to lose ground from what your broker negotiated, and at times, your broker and attorney will want to coordinate and strategize about who communicates what to whom and when.

✅ Tip #3: Keep it moving!

Time kills deals in sooo many ways, and it also has a way of running out the clock, so do what you can to keep things moving during lease negotiations. Don’t sit on emails from your attorney longer than you must, and if you haven’t heard anything in a while, reach out and ask what’s going on. It’s natural to forget details when things sit for too long… and it just takes extra time to get up to speed. One last time for the people in the cheap seats… time = money.

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 The temptation to skimp on legal fees is real, but it’s way too easy to jeopardize your hard work with a bad lease. While it’s easy to complain about lawyers, in truth, their service is of incredible value. A strong lease protects your business interests and keeps you out of court – so you can think of the legal fees you’re spending today as protection from paying more lawyers tomorrow.