In the business of client-representation and consulting, it takes ethics and common sense to maintain the clients’ interests as the highest priority. Unfortunately, sometimes it means taking a beating. In this case, the beating came from both sides.
In a classic “What Would Jesus Do” event, a landlord offered me a generous real estate commission in exchange for advising my client (the tenant) to accept the landlords’ proposal.
A large non-profit had one year left on a five-year lease in a building that was 98% occupied. The lease had a renewal option at “market” rental rates. The buildings’ remaining vacancies, two windowless and undesirable suites, were listed at artificially high rental rates to establish high market rates for lease renewals.
The non-profit tried to negotiate on their own, but weren’t able to talk the landlord down. As a result, I was engaged to persuade the landlord that its’ in the landlords’ best interest to lower asking rents, or my client would relocate to a competitive building, which would be a less profitable alternative for the landlord. Unbenounced to me, this was a bluff. My client led me to believe that relocation was an option, and omitted several critical facts about previous communications with the landlord.
Handicapped as I was, I set out to create a competitive environment for my clients’ tenancy. Proposals were received and I was ready to see who wanted them the most. What I didn’t know was that my client was only interested in one building, the one they already occupied, and that they revealed this position to the landlord three months before my involvement.
I was about to become the one-legged man in an ass-kicking contest, only I didn’t know I was missing a leg until I went to strike.
Negotiations with the incumbent landlord didn’t get off the ground. They said if the tenant doesn’t accept the proposal in the next week, the deal would be off and the space would be put back on the market. The landlord continued, saying my client already revealed their “steadfast” position on not relocating, and other details that worked against us. However, if I convinced my client to sign accept the proposal; the landlord would pay me a $60,000 commission.
The client set me up for failure, and the money was enticing. But it was ethically repulsive. I would not accept something for achieving nothing on behalf of my client, even though my client wasn’t straight with me. In an email, I detailed to my client the incumbent landlords’ position, and stated that if they accept the proposal, I would give them the lion’s share of the fee, keeping only a fraction for myself. I also described the landlords’ comments on prior landlord-tenant communications and how I was preempted.
I proceeded to describe the progress with the competitive buildings and economic benefits of each, including the $750,000 net-effective spread between renewal and relocation scenarios.
The following morning my primary contact, the non-profit’s CFO, said he was terribly sorry, and wished relocation was an option, but if he pursues this any further, his job may be at stake, and he doesn’t have a back-up employment option. Furthermore, he asked me to “bow out” of the renewal negotiation, and give-up the entire fee to the non-profit. As a consellation, they would compensate me with a miniscule amount for my time.
Later that day, the non-profit’s President called and thanked me for my hard work and effort. She continued, saying she spoke with the landlord again, and the landlord would not pay a fee since they were no longer represented, and that they now had six days to accept the proposal. She then asked if I had any recommendations. I said “no”. While I still would’ve liked to help, my only recommendation was to relocate, and I now knew that was not an option.
Rory Johnson 8/31/2007
rory@intelligentcre.com
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