Yesterday, we had a deal blow up on us. This was after we spent several months trying to keep it together. The reason for this was in a large part due to the lawyer.
This was a very lucrative but small deal, the deal price was £345k and the actual valuation would be in the region of £475k-£500k. A rarity to get a discount this large, firstly, in this price range, and secondly, in the prime location of Kentish Town. Generally, this level of discount is seen in high range properties £3m and above, and often which come with problems.
The lawyer decided to raise planning enquires about the next door property, which did not have an impact on the property in question. On what basis was he raising these queries considering he is a lawyer and not a planner, and the lender did not require this information? He also informed the other side that our buyer would be taking a mortgage. Both these points served to extinguish the deal, by encouraging the vendor to seek other offers. Unsurprisingly the seller promptly found a higher one and is currently engaged with another buyer.
Often, lawyers do not have their clients’ commercial interest at heart. The first agenda they have is to cover themselves, and often use legalese to bamboozle the client into thinking they are looking after them, when in fact their primary aim is to look after themselves in case of any comeback in the short or long term. Therefore, they ask more than necessary, above and beyond what is required protect the client and get the deal done.
The other driving force which encourages them to behave as they do, is that they are paid according to the hour or on a case by case basis, and therefore are not incentivised to perform. If they were incentivised on the basis of the deal going through, I have no doubt their focus would be more aligned with their clients. They get paid whether the deal goes through or not. It is the client who is left with all the bills and no property.
If pressed on the points above I’m sure he will respond by saying he was acting in the best interest of the client, by looking deeper into the issues, and he has a duty to be transparent to the other side. I agree completely, the lawyer should be ensuring the client is protected. However, asking irrelevant questions that offer no protection to the client, and just cause delay are not in the interest of the client.
Regarding transparency for the other side, there are ways of framing the issue so it doesn’t scare the vendor into jumping ship. For example, to inform the other side that our client is a seasoned investor, and the mortgage process has commenced already. Such a statement gives the other side a fuller picture, thereby avoiding the risk of them looking elsewhere.
Rest assured, we will think twice about using this lawyer again. It is difficult to find a lawyer who performs consistently. Often, there is a honeymoon period where they treat you with some reverence when you first come on as a client, and then when they know they have you as a client the service levels drop, and at times the situation can feel like they are doing you a favour!
This is the time to switch, when they start to take your business for granted.
However, I have seen some long term marriages within the industry, where the lawyer has been used for decades and gets totally immersed in each and every deal. One Jewish Israeli investor I know, has another Jewish lawyer who does all his work for him. This is the kind of lawyer who takes his files on holiday, and does the exchange whilst he is on holiday. However, he get paid a percentage of every deal which goes through, hence he is suitably incentivised.
Agony Agent Is Here To Help!
Q: Would lowering the rent, in exchange for tenants decorating, be a good idea?
A: Great question. A little while ago we had viewings for a property that was due to become available. The property was not in a great condition and a few people had pointed that out to me. It wasn’t falling apart, it was just very dated, as the last tenant had been in the property for a number of years. As I was showing one company around the house, they said they liked the property, but were hesitant to commit because of the outdated style. They mentioned the stained kitchen, the dull walls and the horrid carpet located in the master bedroom. These were all features which I knew were dragging the property down. Knowing the work needed to be done, and knowing that ignoring the work would result in a struggle to attract tenants, I proposed that the landlord buy the paint, according to the tenant’s choice (as long as they’re neutral colours), and if the tenants agree then they do the labour. In return for their hard work, the landlord would lower the rent by £30 per month. That’s £360 the tenant would be saving annually. They were happy with the idea, as I’m sure a lot of other landlords/tenants would be.
Advantages for the landlord
• No need to get decorators in to do the work, which would cost a lot more than reducing rent by £30 per month.
• Also, getting decorators in would mean having to keep the property empty for at least another week, which would cost even more money. By doing it this way, tenants move in straight away, and decorating can begin when they’re ready.
Advantages for the tenant
• They’ll save money
• They’ll live in a freshly decorated property
• They’ll get to provide input on the decoration style, so they’ll live in a property they’ll get to enjoy more
There were a few rules that needed to be agreed:
• Work had to be completed to a high standard. If not, the work would need to be redone at the tenant’s expense (within reason)
• We provided a strict definition of “high quality” and would be inspecting at every step, so there’s no confusion
• There was a set budget
As it currently stands, the works have been done to a very high standard, and it will only cost the landlord £360 plus paint. Seeing as this is a two bedroom apartment, I think the landlord got a great deal on this. The company actually asked me if we had any more properties in that location that they could get a similar deal with...
I’d be interested to know if any landlord or tenant have ever had an offer like this, or even agreed something like this. Do get in touch and let me know.
Sow & Reap