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Save Your Commercial Real Estate Deal from the Weakest Link

By Maura O'Connor

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The motorboat was primed, with all systems checked and ready to go.  It was loaded with great food and great friends for a weekend cruise to Catalina Island.  The route was plotted; ocean conditions were favorable, weather perfect; the radar, radio and chart plotter were working; paper backups of the courses to navigate were prepared; the mooring had been reserved.  All that remained was to stop for gas on the way out of the harbor. 

Although the skipper clearly asked for gas, and not diesel, the teenaged gas station attendant filled the boat’s engines with diesel.  As a result, the Catalina weekend was scuttled just past the breakwater of the port:  two engines sputtered their discontent, then died.  After a tow back into the harbor, host and guests spent a long evening at the marine gas station draining the tanks, engines, and filters and refueling, followed by a weekend of several short runs -- near the coast for safety -- to make sure no permanent harm had been done.  The weakest link had struck.

Every commercial real estate deal, and every real estate closing, is at risk of being killed inadvertently by the weakest link at all times until the documents record and the checks (or wire) clear.  Most real estate deals bring together several people who have not worked together before, each with a role to play, and many with adverse interests.  Obviously, the biggest risk to any deals is failure of the main parties to it to agree.  Once they agree, however, there are still many opportunities for weakest link risk to kill or delay a closing.

However, you frequently don’t know who the weakest link in a new commercial real estate closing will be.  Will it be the escrow officer, who may lose key papers at the last minute?  Or the broker, pushing too hard during negotiations and irritating the other side enough to kill the deal, or dabbling in technical legal drafting of issues he or she doesn’t understand?  Or the lawyer, arguing too long or too heatedly over minutiae, or identifying risks that scare his or her client but not solving them?  Or the tax advisor, who re-analyzes every issue but cannot explain how to structure the deal?  Or the principal, whose outburst at the other side can kill a deal even if killing the deal is not in his or her own interests?  

It goes without saying that you don’t want to be the weakest link, and that you will avoid it by doing your part on time, communicating with others clearly, and cooperating politely even when circumstances are trying.  How can you anticipate and avoid the risk of the deal being scuttled by the weakest link – the weakest necessary player in the transaction?

One of the first things I do as a lawyer in any new deal is to get, or to make, a list of all the players and their contact information (including cell and home phones if I can get them) so that if there’s a problem I can reach anyone involved in the deal in real time.  But by then, you’re doing triage. 

The best way to avoid the weakest link risk is to head it off by getting things organized and done as early as possible.  Of course, this can be hard to do in the real world, where deals make their own timing demands.

However, you can minimize the weakest link risk by making sure you have -- early in the deal -- a shared checklist or other organizational tool used by all parties spelling out what needs to be done, by whom, and by when.  Then make sure each person does his or her part, on time.  Each person needs to know he or she must timely answer his or her phone calls, emails, and the like.  However, ultimately, someone has to be the skipper of the deal:   someone (usually the lawyer) has to ride herd on the other players to make sure each actually does his or her part, on time, and that all information is not just sent, but is also timely received and understood by the recipient. 

Really, the job of shepherding a deal through a successful closing requires organizational skills, thoroughness (to make sure in advance that every document is correct), and diplomacy (needed to remind the players to do their jobs, and to confirm they are doing them right). 

Perhaps not surprisingly, physical and mental stamina is also needed when heading into a closing:  every detail must be checked and rechecked to make sure it is correct so that the deal can close on time without a last minute foul up, like a document that is not accepted for recording.  (This checking process must happen even if it conflicts with going on vacation, or going home on time, or going to little Johnny’s or Jessica’s school play). 

Being able to follow up with folks politely and, sometimes, while demonstrating a sense of humor (and not taking personal offense from other players who may be overtired, overburdened, or simply unpleasant) goes a long way to keeping them focused on the closing at hand, and not focused on the reminders (nagging) that they are receiving.  And, of course, thanking the various players for their cooperation is not only the right thing to do, but incents further cooperative behavior.

(To search across all ALM blogs, go to www.Lexis.com.)