The great fixed fee debate - the lawyer's argument

It has been quite a while since I last blogged and even longer since I blogged about a potentially controversial subject so why not kill two birds with one stone.  2013 has been a year of two halves for the legal profession.  The first half of the year firms had it rough and indeed some did not make it through the whole year as a result.  The second half was much more positive overall – deal volumes were up especially in the real estate market in which I largely operate.  Lending has returned partially from banks but also from alternative sources. However regardless of how much improved things are or indeed how much more they might improve there is one thing that is not going to change – the demands for greater price certainty from clients.

First I would like to dispel some myths that many of those not in private practice seem to believe – lawyers do not love hourly rates; most transactional lawyers I know hate the billable hour.  It is seen as a noose around the neck.  We know clients hate it; believing that it encourages us to be inefficient since the more time we spend on something the more we bill.  However, I have never spent more time on a matter than I believed necessary to achieve the result the client required.  Frankly, I rarely have the spare time to time dump.  Even if I did I recognise that there are more valuable things to be doing than being inefficient.

Therefore I welcome the end of the billable hour – it creates a barrier between client and professional; it creates distrust and an assumption that there is padding in any quote given.  But my welcome comes at a price – I am happy to take on more risk in terms of pricing; I am happy to give my clients price certainty.  But I am also a businessman.  I hate to break it to my clients but I am in business to make a profit.  That really should not come as a surprise to many, if any, of my clients since they are all in business for the same reason.  That being said sometimes it feels like clients do not recognise that ultimately law firms exist to make profit.  We do it by providing a service but if the provision of that service is no longer profitable then the ability to provide it disappears.

So what does this all mean in the context of the end of the billable hour and the demands for greater price certainty?  Well here are, what you might call, my wish list of requests to clients when it comes to agreeing price certainty on a deal.

1. Fixed not capped
2. Price the deal
3. Timing is relevant
4. If you want extras pay for them
5. Cash flow quid pro quo

1.  Fixed not capped

When you ask me for certainty don’t ask for a capped fee.  That is akin to having your cake and eating it.  A capped fee seeks to keep the hourly rate open for your benefit but shut for mine.  It is not risk sharing but rather placing all the risk on the law firm for no upside benefit.  At the end of the day agree a price that you are happy with for the transaction.  If your numbers work at that price don’t look to eat away at the potential benefit to me by effectively denying my ability to use efficiencies where I can so that I can try and increase my margin.  It is important to recognise that time specifically spent on a deal may not be reflective of the cost especially where there are efficiencies that I have introduced.  There is an R&D cost to those efficiencies.  If you truly want lawyers to become more efficient and invest in developing processes then the carrot approach will work far better than the stick.

2.  The fee is for that deal

In order to price things we need to know the scope and then once the scope is agreed don’t expect work outside of the scope for free.  Now I admit that law firms can often be their own worst enemies on this front.  There is the tendency to quote on the basis of assumptions or scope that do not really reflect the likely work involved (e.g. when quoting for a property acquisition assuming there will be one turn only of the sale agreement).  We need to be more honest and use our experience to quote properly for the deal; that is a legitimate expectation of our clients.

Further lawyers are always reticent to raise the fact that something is out of scope and the additional charge for doing it.  Part of the reason for this is the response that is often given when this point is raised – the lawyer is made to feel guilty for seeking an additional fee.  But why should they?  If they have scoped the work honestly and legitimately at the outset and something unusual arises resulting in a whole different work stream why should the lawyer not be able to agree a fee for that new work stream?  If I specifically exclude tax from my fixed fee and then the client seeks tax advice because it thinks there might be a VAT angle it is legitimate that as a firm we can agree an additional fee for that advice – it can still be a fixed fee.

Using a non-law example, I ask a stationer to provide me with headed notepaper for which he provides a quote; then I ask him to provide envelopes in addition I would expect him to charge me more.  No one would argue with this because people physically feel the extra envelopes.  The problem is in the legal context clients don’t necessarily see the ‘benefit’ as they picture the legal advice as a single unit.  Fixed price quotes demand the clients change their perceptions as well as the lawyers changing ours.

3.  Timing is relevant

Just because a client is not paying on the basis of hourly rates does not mean that the length of time a deal actually takes is no longer relevant to the quote given.  The longer a deal lasts the more resource it is likely to use up or require to be kept available.  Therefore it is legitimate to quote a price based on the assumption that the deal completes by a given date.  Again the date should be realistic and assume some slippage from the timings given in any agreed heads.  Further the lawyer should seek to agree a fixed fee for each time extension there is not hourly rates for any such extension.  There can be caveats to this such that, for example, a ‘down tools’ period only qualifies for a percentage of the ‘extension fee’.  This needs to form part of the pricing at the outset.

Often time extensions may be associated with or run in parallel with changes in scope.  No one is suggesting you can charge twice for the same thing but the pricing needs to reflect both the resource required and the length of time for which it is required. 

4.  If you want extras pay for them

Clients want pricing certainty and, more often than not, they want the cheapest quote.  To achieve this I need to be able to work in the most efficient manner possible.  Therefore, nothing destroys the pricing relationship more than when a client demands a cheap quote and then insists on the matter being ‘partner-led’.  Partners are more expensive because of seniority.  If you want a ‘partner-led’ transaction you have to be prepared to pay for it.  Again not on an hourly rate basis but rather on a higher fixed price basis.  Clients are entitled to expect their work to be done properly by those qualified to do the job; senior input may be necessary but how much may be a matter of choice rather than need.  If you want the cheapest price this has to come at a cost – you will get less experienced people doing the work.

If you book and pay for a Superior Room at The Dorchester you don’t turn up and demand the Presidential Suite.

5.  Paying the bills

My final point is probably the most important but also likely to be the most controversial.  If clients agree a fixed fee then they should be prepared to pay that fee on, say, a monthly basis during the transaction not merely at completion.  There can still be balloon payments at milestones or at the end of the transaction to avoid a perception of a lack of impetus to get the deal done.  Fundamentally a law firm’s biggest risk is its ability to manage its cash flow (in recent history this has been the biggest cause of law firm failures).  In a transactional department the time taken from matter inception to completion to billing and then payment can be significant.  Law firms need to be able to reduce this time period. 

Even on a transaction that takes two months from inception to completion (about the average expected for a real estate acquisition) then assuming another month for payment of the bill a firm is looking at a minimum of three months before earning a penny for its work carried out three month’s previously; bearing in mind much of the work is front loaded that is a long wait.  In that time it has had to pay all of its overheads.  In the days of hourly billing this was largely accepted as part of the quid pro quo for charging per hour. No pain no gain.  But if law firms are, rightly, to move to fixed fees it is legitimate for them to expect to be able to smooth out the cash flows.  Whilst law firms can be expected to take on the pricing risk they should not also be required effectively to finance their clients’ transactions by being unable to expect payment of anything until completion.  That’s a double-whammy.


So hopefully you have made it through my thoughts on the brave new world lawyers and clients are now entering in the billing arena.  I welcome the need for greater certainty on fees.  I believe it is in both clients’ and lawyers’ best interests.  But if clients truly want to see the end of hourly rates and lawyers to embrace the idea of pricing certainty they need to come to terms with what lawyers need in return.  I do not think that I am asking too much.  I am just a businessman seeking to have an honest and open discussion in the hope that together we can build a new future in the provision of legal services.  As such I would welcome and actively encourage others to express their views.  I openly admit my bias on this subject but do not feel I have been dishonest in my approach; if you disagree then please let me know and why.

On-line precedents: Help or hindrance?

The  internet has brought many benefits to lawyers and particularly to firms who wish to avoid (or cannot justify) the employment of a Knowledge Development Lawyer (aka a Professional Support Lawyer). Whereas previously in order to keep up with the latest legal developments one had to subscribe to countless hard copy journals; constantly receive updates from publishers; then spend time updating the loose leaf guides (often a job for the unsuspecting summer student) now this all happens on-line saving significant time (and paper for the more environmentally conscious of us). None of this is a bad thing and is of great benefit to large and small firm alike. This is further enhanced by the availability of automatic updates notifying you of changes to law, recent case updates and similar.  Keeping up to date has never been easier and, frankly, I wonder how we ever managed without - perhaps we were blissful in our ignorance?!?

Courtesy of Rev Dan Catt via Flickr

However there is another development which is in my experience is less than helpful - the emergence of the on-line precedent. On the surface what could possibly be wrong with on-line precedents? Apart from anything else, I hear you say, they result in much more standardisation; who needs 10 different forms for the same transaction. Surely this is a good thing and will help save time and reduce costs?  I even suggested something similar myself in respect of standardising leases, did I not?
Well having recently run a transaction involving a significant number of properties across a portfolio with multiple other small firms involved I can say that this is not the case. Part of the transaction involved obtaining licences from landlords and due to the nature of the properties most often the landlords were represented by small firms. What we noticed was that the same clauses were appearing on almost all the licences we were receiving and the same problem clauses at that.

Why were these clauses a problem?  Let me outline the two most major issues the "standard" precedents caused:

1. In some cases the clauses were not commercially acceptable. Whilst in the context of a simple transaction involving two individuals or a company owned by its directors they were probably okay, on anything more complicated they became onerous and unworkable. The clauses were not something we as a firm or the other large firms involved have in our standard institutionally accepted forms of documentation. However by including it in their on-line resource the resource provider has created the impression that it is standard in the market. I lost count of the number of times we were greeted with a, "This is a standard requirement of our client and is standard in the market" response. If your client's precedent is an on-line resource I suspect your client is pretty oblivious to most of its terms and just because it is in a precedent does not make it market standard!
2. The guidance provided by the on-line resource can be unhelpful and, at worst, obstructive. Suggesting a clause is necessary because without it your client's insurance is at risk when in reality the clause is asking a tenant to take on a risk it cannot mitigate with no obligation on the landlord to assist when it could easily do so is hardly a recipe for productive negotiation. Whilst some firms adopt an aggressive first draft and look then to compromise that only works when the draftsman understands what is necessary and what is unnecessary. We spend a significant amount of time going through our precedents with new joiners explaining the purpose of each and every clause.  The purpose of this training is to ensure that they understand why the clause is there and, by extension, if and how it can be amended or, in certain circumstances deleted.  On-line precedents do not come with this level of training.  Therefore, when an amendment is sought, fear sets in because the lawyer does not have the confidence that they fully understand why a clause has been put into a document.  Whilst the argument we put forward may sound convincing what if we are ignoring another reason for the clause's existence?  Conceding the point might result in their client being exposed and the lawyer being negligent.  Therefore, better to resist and rely on the "it is a standard clause" defence.

There is no point complaining unless you propose a solution.  The first solution would be to get rid of on-line precedents but I accept this would be a step backwards and not particularly helpful to the legal fraternity.  If I am honest I think the issue really lies with the draftsmen of these precedents.  In some cases it is my suspicion that the draftsmen are not transactional lawyers but rather professional KDLs.  Whilst this works within a transactional firm this is because the KDLs have the benefit of engaging daily with the transactional lawyers.  This creates a necessary and mutually beneficial exchange of thoughts and ideas.  Draft clauses which show themselves to be commercially unviable fall on the lawyers' equivalent of the cutting room floor.
However, some of the on-line precedent providers loudly and proudly claim that there precedents have been drafted for them by lawyers and law firms so lack of transactional experience cannot along explain the issue.  The problem with this source of precedent is that, whereas within the law firm there exists a peer group within which a proposed amendment can be discussed, evaluated and agreed/amended/rejected with the benefit of the collective hive mind, for the smaller practitioner such support simply does not exist.  Therefore firms providing these drafts must ensure that their drafts are commercially and legally unbiased.  If the starting point is a reasonable one then the fact that a lawyer is less willing/confident to concede a point is not likely to be such an impediment.

Don't get me wrong.  This blog is not intended to be a criticism of my peers who work in smaller firms.  Frankly I think that they do an incredible job.  It is easy to forget how much I rely on the support I have from KDLs, peers and, indeed, as much on-line resource as I could possibly ask for.  Lawyers in smaller firms simply do not have that level of support and yet provide as excellent advice and client service as many a large firm.

No, my criticism is of the providers of supposed tools aimed at reducing the burden of the small firm lawyer.  As I have mentioned previously the role of the transactional lawyer (and by extension his drafting as his tool) is not to seek to screw the opposition.  Those who provide resources to enable the lawyer to do this need to ensure that those resources truly assist the lawyer in furthering his goals and do not, instead, become an unnecessary and unwelcome hurdle to be overcome.

Drafting advice . . . from Princess Leia

I enjoy a bit of sci-fi every now and again and sometimes think that much can be learned from the sage advice of Yoda and friends ... well not really but it can be fun imaging how Yoda would dispense legal advice:

"Enter into that contract will you hmm? Difficult to see the future is. Trust him I do not!"

However, when recently remembering some of Princess Leia's appearances (stop thinking bikini in Return of the Jedi guys) I remembered this line from Episode IV: The New Hope responding to Governer Tarkin's claim that the Death Star meant no planet would dare oppose the Emporer:

"The more you tighten your grip, Tarkin, the more star systems will slip through your fingers"

What on earth is the relevance of this to drafting I hear you ask (not in space of course since sound cannot travel in that vacuum)?

There are some lawyers and, indeed, some clients who believe that in order to make every contract watertight (I am yet to see any contract which achieves this aim) it must cater for every possible event. They will spend painstaking hours trying to conceive every possible (and impossible) "what if" and then seek to draft a provision to deal with it.

However, too much specificity (might be an abuse of a statistical defintion this) has negative consequences. It is next to impossible to draft for every eventuality. The more specific your drafting ("the more you tighten your grip") the greater the risk that events not specifically mentioned will not get caught ("the more star systems will slip through your fingers").

So not only will you have spent a lot of time and cost on legislating for events that will probably never happen, you have quite possibly reduced the chances of dealing properly with the unpredictable one that does.

Identify the real commercial and legal risks (not the distant "what ifs") and draft specifically for those. The rest cover with more general drafting; it's cheaper, more efficient and better for your client in the long run.

Beware the dark side of the law and may the force be with you.

Suits you, sir: The art of bespoke drafting

Almost a month ago I wrote a blog entitled "Transactional Law: a bit like being a London cabbie".  Recently I have been involved in a transaction where I felt like a cabbie with a passenger constantly changing its mind as to where he wanted to get to.  This was an unusal transaction requiring some pretty bespoke drafting which in turn got me thinking about how one should approach drafting for bespoke transactions.  Here's what I came up with:
1.  Be clear on your purpose
Drafting anything, even if it is just one clause in an agreement, is no different to preparing a piece of coursework.  If you simply start drafting you will land up in a mess.  You need to set out what the clause is intended to achieve and also consider any interrelationships with other clauses.
2.  Use decision trees
When trying to draft a more complicated arrangement that requires notices, approvals and inter-connected decisions it is often beneficial to create a decision tree which maps out the process clearly.  This serves two purposes.  First, you can show this to your client before drafting anything to ensure that you and they are on the same page.  Secondly, your drafting will be a lot simpler.
3.  Keep it simple
By this I do not necessarily mean keep it short.  Sometimes draftsmen try to be to clever and express in one sentence too much.  Rather do it in steps.  Think like a mathematician in a logical manner.  Each sentence of drafting should contain only one concept, obligation, effect, etc.
4.  Do not draft for every possible outcome
This is the road to madness and also more likely to result in something being missed.  Lawyers are not omnipotent (despite what some might claim) and cannot predict the future.  Sometimes more general language is safer than being specific as the use of the specific can lead to the exclusion of the general.
5.  The importance of the "cold towel".
Probably the most important aspect is when you have finished the document put it away for 24 hours.  Then re-read it but with the following thought in mind - if I know nothing about this deal can I understand the agreement, the obligations on the parties, the processes involved, etc.  This is not about trying to spot another area for further expansion or loophole to be closed nor about spotting errors (although this is pretty important too)!  Rather it is about whether or not the document is an accurate map of the journey the parties intend on taking.  Remember, the parties will only look at the map when they are lost and cannot agree what direction to go.  If the map is unclear what use is it.

No doubt some will argue with my views whilst others will suggest I have missed something else fundamental.  Their comments and views are more than welcome.

Transactional law: A bit like being a London cabbie

This blog was encouraged/requested by LegalEagleMHM and is being co-hosted on her fantastic blog : Diary of a Diploma in Legal Practice student which contains many thought-provoking and inciteful blogs and the latest of which on "What makes a 'great' lawyer and do clients want 'greatness' or savings?" clearly shows someone thinking about the actual facts of the job.

Every six months we have a new intake of trainees.  These trainees were generally signed up at least 2 years' previously either in the September of their final year in University or immediately prior to their embarking on the CPE (commonly known as the Law Conversion).  Every six months I find myself asking the same question:

"What do I expect from the new intake?"

You might think I am pretty daft constantly considering the same question but in reality I believe it actually reflects the constantly changing nature of the role lawyers perform.  The graph shows two important attributes that are required from lawyers today - legal knowledge and commercial acumen.  Most law students probably believe (and I admit I am guessing to a certain extent) that legal knowledge is fundamental and that commercial acumen is a distant second.  However, this is very wrong and here is why.

I am a transactional real estate lawyer.  My clients do not care about the law they merely care not to fall foul of it, or if they do, to reduce the negative effects.  My clients come to me with a vision, a transaction they wish to transact, and I am a facilitator seeking to turn their vision into reality.  What matters to my client is getting the deal done.  In order to be able to service them I must understand their commercial drivers, what it is they are trying to achieve.  Without that understanding I cannot possibly enable them to achieve their vision.  With that understanding I am more than merely a facilitator, I am someone who can help develop the vision and improve on it.

So does that mean that legal knowledge is not important?  Absolutely not.  I must know the potential pitfalls that could destroy my client's vision but not so that I can then tell him all the issues but rather so that I can manage the transaction so that the vision is realised whilst avoiding the issues.  Like the London cabbie - I tell him the destination and expect him to get me there in the swiftest, safest and cheapest way.  Sometimes I might ask why he went a certain way but I do not want to hear from him a running commentary on why he did not go a different way.

Back to my fresh intake of trainees joining next week; which is more important - commerciality vs. legal knowledge.  Well, when I started as a trainee in the 20th century(!) my first seat was with a senior property partner at Berwin Leighton called David Rhodes.  On my first day David turned to me and said:

"Barry, you undoubtedly know more law than I do, but I know how to use it better"

This thought has remained with me throughout my career.  Obviously David did know more law than me but that was not relevant.  It is not knowing the law that is important but rather knowing how to use it. 

I expect trainees to know the law in detail and, more importantly, how to be able to research and find out the law.  I do not expect trainees to know instantly when the specific legal point can be disregarded as it does not affect the client's vision.  In fact, I would be very concerned if trainees and junior associates were not considering the full legal picture before telling me what they propose to advise the client.  But that is where the commercial acumen comes in.  I do expect my trainees to show they understand what the client's vision is and how it is our role to deliver that vision whilst negotiating the legal minefield.  They show this by telling me what advice they would give the client after going through the issues.  Clients do not want academic papers; they want actionable advice.  Only commercial awareness allows you to give actionable advice.

So which is more important.  Both and a lawyer missing one or the other will eventually fail.  A lawyer with a lack in the legal knowledge department will lose clients due to negligence.  A lawyer with a lack in the commercial awareness department will lose clients due to failure to deliver the client's vision swiftly, efficiently and safely; a bit like a bad cabbie.

The client-lawyer relationship - can we fix it?

This blog really continues a debate that was started by @legalbizzle and @legalbrat a few weeks ago.  There are a number of postings relevant which you might consider pre-course material including:

• What lawyers can learn from call centres by Legal Bizzle
• It's not about the biscuits by Legal Bizzle
• It's client care but not as we know it by Legal Brat

In truth this is not a new debate, in fact it is not really a debate.  It is obvious that relationships can only exist between individuals and not between corporate entities - a relationship is not a contractual bond it is an emotional bond and entities do not have emotions.  A CEO or Group Counsel might say "We use BLP for our Real Estate work" and it might be true that Berwin Leighton Paisner have been appointed but the reason for that appointment will be due to that same CEO/Group Counsel having a relationship with individuals at BLP.  As a firm we cannot take the relationship for granted and as with any relationship it must be constantly worked on.

I have often pondered why it is that people can be in a relationship for years and even living together but then get divorced relatively quickly after getting married.  I believe the answer is obvious - prior to getting married both parties worked at the relationship to maintain it.  Both realised that in order for the relationship to be sustained it required effort and sacrifice on both sides.  However, once the couple are married they fall into the trap of thinking that the marriage certificate is proof of their commitment and no more effort to maintain the relationship is required.  However, the opposite is clearly true, the marriage is simply a new phase to the relationship and the parties must still go to great effort and make the same sacrifices if the marriage and thus the relationship is to survive.

Leaving the sphere of marriage counselling and returning to client-lawyer relationships, it is clear both from the articles above and personal experience that the same is true.  During the courting phase lawyers will spend a large amount of time talking to and supposedly getting to know the prospective client.  Then once the appointment has been made many lawyers will simply stop with the "idle chatter" and only talk business.  It should hardly be surprising that the client, in such circumstances, wakes up in the morning and views his lawyer in a negative way.  His lawyer is not interested in helping him achieve his goals.  His lawyer's sole motivation is acquiring instructions for the purpose of making money.

So if it is so obvious why are so many lawyers bad at it?

The answer to this is not so clear but I believe it may lie partially in the traits of the average lawyer and partially in the billable hours tradition that has built up.

In terms of the billable hours tradition I think that this is something which has been mentioned before.  From a young age it is impressed upon the junior lawyer the importance of the billable hour.  That is how firms have traditionally made money.  Your associate's salary is a fixed annual sum but the more billable hours you can get out of them the more profit you will make.  The problem is that in the associates' minds this translates into anything which is not billable as being evil.  Accordingly, said associates do not want to "waste" their time in "idle chit chat" with clients when they could be billing another client.  By the time the associate has reached a more senior level the habit is embedded and breaking that habit is significantly harder and requires effort.

Therefore, this part of the problem is systematic and within the power of the profession to address by better recognition of the non-billable hour at the most junior level.  Certainly at BLP we actively encourage our junior associates to engage on a social basis with clients.  But we have not solved the problem because, at the end of the day, there continues to be the pressure to record time, leaving associates making bad cost-benefit analysis decisions and probably not investing sufficient time in building the relationship.  But it is a start which will hopefully better equip our associates as they move towards partnership or into in-house roles.

The traits issue is less tangible but I want to throw it out there as a thought for discussion.  I just wonder whether law attracts a certain type of individual who is not as comfortable with developing personal relationships with multiple contacts.  As with everything there are exceptions to the rule and these exceptions are found in the rainmakers.  Whilst some of what these rainmakers are good at can be learnt, their success is due in a large part to their personal character traits.  Whilst we might be able to provide training and alter some bad habits fundamentally it is unlikely we can ever change (nor do I believe we would want to) a person's character to such a large degree.  If that is correct then there may be an argument that whilst small improvements will be made in client-lawyer relationships, fundamentally if you expect all the lawyers to suddenly become the best relationship people around it just ain't going to happen. 

What category do I fall into?  I suggest you ask my clients.

It's Tuesday: I'm a lawyer, get me outta here!

This blog was initiated by the article appearing in The Lawyer on-line today entitled: Lawyers can't handle Tuesdays, survey reveals.  The "research" in question was commissioned by Michael Page International and its results are summed up by their marketing director Eamon Collins as follows:

"This research has told us that 10am on a Tuesday is the most stressful time of the working week, and it isn't a coincidence that this is also when traffic to our website peaks."

Gimme a break.  The article does not mention who carried out the research or how but it is likely to be as scientific as the intendance research ranking law firms by Twitter use which gave rise to huge debate  Let's accept that the research could actually come to the conclusion that 10am on a Tuesday is the most stressful time of the working week.  Does Michael Page really expect us to believe that the first thing a stressed out lawyer does is say:

"F*&k this, I am out of here.  Let's see what Michael Page has on offer this week".

What a pile of dog poo (sorry still can't bring myself to swear on-line).

What's worse is that this kind of marketing dressed up as serious research does immense damage by belittling what is a very real issue in law firms today (and I suspect in the in-house world too).  Lawyers are under incredible stress for all different reasons.  All this article does is make a mockery of the issue by giving Michael Page cheap advertising space.

So here is an attempt at a more helpful review of stress in the legal world today; its causes and perhaps a stress reliever or two for all you stressed out lawyers out there.

So here are some causes I have noted in my long and illustrious career to date :

1. Technology - yes we all thought that technology would make our lives easier but the incessant stream of information, e-mails, red-lines, twitter, IMs, iPhones, internet browsing actually add up to an impossible mix that our brains do not have the time to digest.  Top of my list is e-mail.  In the old days lawyers and clients communicated by letter (or fax if really urgent).  It was recognised that it took time for letters to arrive and letters to be sent as well as time for documents to be typed.  However, the advent of immediate correspondence has led everyone to believe that if a question is asked by e-mail at the push of a button then the answer should come back at the push of a button.  We might use computers to communicate but the answers still come from a human being who may need to analyse, annotate, review and meditate before responding.
2. Lack of support/supervision - this means poor management by us, partners and senior associates of those we instruct further down the seniority chain.  It is right that associates should not need constant hand holding.  On the other hand giving over the instructions is only half the job.  Junior fee earners (and senior ones) need to be provided with proper supervision and support if they are to fulfil their potential.  They need to be pushed but not off the top of a skyscraper!
3. Poor client management - how easy it is to complain regarding unreasonable client demands but is that really the client's fault?  The client is buying a service.  Whilst it would be nice to think that when asked the question "when do you want it for" the client will respond with an answer relating to when he needs it, that was not the question asked.  Perhaps the question we should be asking the client is "how does this piece of work fit in with your deliverables at so that I can ensure that we can revert in a timescale that enables you to meet your deadlines?"
4. Poor working habits - also known as "rabbit in the headlights" syndrome.  This is the person who faced with a number of different tasks keeps on jumping from one to the next without actually finishing any of them and at the end of the day feels they have accomplished nothing (which is actually true).

And now for some self-help remedies (one for each issue):

1. Just because you get an e-mail does not mean you need to respond to it immediately.  Turn off that annoying "ding" and the pop-up window.  Clients know that you are not necessarily at your desk and that sometimes you need to think about things.  If something really is urgent they will pick up the phone and call you so if it rings you better answer it.  If it is not urgent ask the client if you can call them back.  Tell them you are just in the middle of something and want to be able to give them your full attention which will be easier once you have finished what you are doing.  Make sure you say when that will be.
2. If you feel unsupervised then say something.  Don't send an e-mail to someone asking them to look at a document.  Get off your backside, print it out and take it in.  9 times out of 10 the person you go to see will be happy to help and you will learn far more.  Contrary to popular belief partners do not eat their young (I believe that's even true in the "eat what you kill" firms).
3. Manage your client's expectations - well this just goes back to the whole client care debate.  When you get a new instruction how about you pick up the phone to the client and talk it through with them.  Understand what their drivers are; what internal pressures they are under.  Even if this does not change the timetable you will develop a much better relationship with the client and the better the relationship the better the chance of sensible timetables being issued in the first place.
4. Sorry but all I can say to this is "Get a grip".  You simply need to force yourself to complete one task at a time.  Look at what you have to do and ask which is the most Urgent and Important.  That is what you do first and you finish it before you look at your e-mails or any other task.  If two tasks rank equally then just pick one; just go with your gut.

Well that's it for the tips.  One last word on stress.  The fact is that doing what we do for the people we do it for stress is a fact of the job.  You can take positive steps to avoid it but there will always be times when you are under stress.  But at the end of the day it is only a job.  Don't let it ruin your life.

The client care debate - an out houser's view.

Let's get one thing straight.  This is meant to be controversial, it is meant to stimulate debate.

There have been a number of excellent posts in the last couple of weeks by stalwarts of the in-house blogging circuit on the provision of legal services by law firms and lawyers.  Specific examples include:

• "It's client care but not as we know it" by @legalbrat
• "Crossing a (red)line" and "It's not about the biscuits" by @legalbizzle

These blogs are excellent and provide a singularly valuable resource to the out house lawyer who wants to gain a better understanding of how in-house lawyers (and by extension) clients view their legal advisors as well as the do's and don'ts likely to result in praise or a swift disinstruction.  My message to them and all in-house lawyers who blog on these subjects is "keep it up".

Clearly one of the purposes of the above blogs is to encourage debate with the providers of legal services, Big Firm LLP.  And yet, for example, @legalbrat is failing miserably to get any response from any out house blogger to his challenge despite it being featured in @legal_week (see here).

In fact, out house blogs generally fall into the following categories:

• recent legal developments/statutes (yawn!)
• anonymised (amusing) anecdotes of a day in our life (some of which are a joy to read - @magiccircleminx being one such example - but hardly are just there for enjoyment)
• random musings on some news with possibly a connection to the law (does anyone really care about my opinion on interest rates?)

However, what I have failed to find is a single blog by an out houser which considers the challenges facing private practice firms in their provision of legal services to the world and ways these challenges could be addressed.  Why is this?

A number of possible answers spring to mind:

• The "It's a wonderful world" answer - There are no challenges.  Life is just about perfect and we happily are able always to meet if not exceed our client's expectations; associates are completely satisfied and would work for free with no job expectations; our fees are always agreed because we unerringly get it right and our clients love us to bits and gleefully pay all bills because they see the value ooze out of every penny like a BOG10F would in a supermarket.
• The "We haven't a clue" answer - what do lawyers know about addressing the challenges?  Of course there are challenges but we went to law school not business school and so have not got a clue how these challenges should be addressed.  All we can do is employ expensive consultants to tell us the same thing they have told every other firm they have provided consultancy services to: cost-cut, outsource, commoditise, value-add; show the client you love them.
• The "We are afraid of corporate espionage" answer - Behind the scenes we are working very hard at changing the way we do business and work with our clients.  When we think we have discovered the secret then we will tell the world with a front page splash all over @thelawyer or @legal_week but until then we daren't breath a word because one of our competitors might latch on to the idea and steal it from us and of course they could not possibly be considering the same things we are.
• The "Bury our head in the sand" answer - we are aware of the challenges but hope that if we wait long enough either they will go away or we will retire before they are big enough to kill us. 
• The "Too scared to engage" answer - we have some ideas and would really like to engage with our clients to discuss them but we are afraid that in order for our clients to work with us on developing those ideas we would need to have a full and frank discussion regarding our feelings as well as theirs.  They might not like some of what we say and we can't afford to upset them.

In truth the answer is likely to be a bit of all of the above.  Many law firms are engaging with their clients on a one-to-one basis and in doing so are improving the level of client care and client satisfaction.  But even in these closed discussions one has to wonder how much is raised of what a law firm expects from its clients and focuses almost exclusively on how the law firm can improve the service it gives to the client.

Maybe I am naive but in my view the law firm-client relationship should be symbiotic as opposed to parasitic.  As such, would we (clients and firms) not be significantly better off if we could actually openly talk to each other about what we both like and dislike about each other; about what we each could do to make the other's life easier and more fulfilled.  I know that my firm's success is intrinsically linked to my clients' success but do my clients think that their success is in any way dependant on my firm's success?  I doubt it and yet I believe it is.  A successful firm, full of fulfilled lawyers who feel appreciated for the work that they do (and I do not mean in pure financial terms) will provide a much better service.

This kind of fulfilled relationship requires openness on both sides.  But how can we ever expect our clients to help us achieve such a level if we do not even tell them what we genuinely want from them.  How it would be nice to be thanked for working through the night and cancelling dinner with your wife.  How, having done the deal and invoicing at the agreed fee it would be nice if the bill was paid without any need to chase.  How, fundamentally we accept and appreciate that we are service providers who must always be at their best but that it would be nice if the service recipients recognised that this is not always easy.

At the moment it seems to me that all the input is from the in-house lawyer setting out what they want with no input from the out-house lawyer setting out his stall.  We tell the client what they want to hear and listen to what they have to say about the services we provide.  But do we ever tell them how they could change the way they work to help us?  So my challenge to my fellow out housers is let's engage with our clients in a more meaningful manner.  They do not have all the answers and we are not solely responsible for all that is ill with the client-lawyer relationship.  Do this and then maybe together we will reach new heights in the provision of legal services.

Then again, maybe not. . .

Lost in translation: The joys of international clients

I was talking to a friend who described to me a fascinating exchange he had had with a foreign client.  Below is a hypothectical (but based on real events) transcript of an exchange between a UK real estate lawyer and a South East Asian investor client looking at buying some pretty expensive real estate in London.

Client:  I need to understand the risks associated with tenants exiting the property?
Lawyer:  The lease is for a 20 year term and there are more than 17 years left to run so the issue does not really apply to this property.
Client:  I know the term has more than 17 years left but what if the tenant leaves early?
Lawyer:  If Leman taught us anything it is that no tenant is too big to fail but this tenant has a triple-A rating so it is very unlikely that it will fail in the short term.  The assignment provisions ensure that any new tenant would need to be at least A-rated.
Client:  But what if the Tenant just walks away?
Lawyer:  There are no break options in the lease so he cannot.
Client:  But what if he just does?
Lawyer:  It is a major listed plc, it would be easy to pursue it for the rent and liabilities.  It is very unlikely as there would be reputational damage to the tenant as well.
Client:  But what if he just tore up the lease?
Lawyer:  The tenant does not have any right to tear up the lease.
Client:  Yes he does, he has a right to walk away whenever he wants.
Lawyer:  There is no right in English law to walk away from a lease.
Client:  There is in South East Asian law.
Lawyer:  Okay, now I understand your concern.  You do not need to worry.  As this property is in England and there is no right under English law for a tenant to just walk away this is not a risk for you.
Client:  But in S.E.A. there is; how do we deal with this risk
Lawyer:  I'll get back to you.

Any suggestions for the poor lawyer how he should get his S.E.A. client comfortable that English law is relevant and that the risk he perceives to exist does not actually exist?

Exceeding the client's expectations = job satisfaction



The Shard at night



It's been a bit quiet on the blogging front this week which, for me, means one of two things:

1. I have been away; or
2. I have been having a crazy week in the office.

Looking out of my office window just now at a complete white out of London my view of The Shard being completely blocked a part of me wished the reason was 1.  However the real reason has been that I have had one of the busiest weeks in the office for quite some time.  Back to the good old pre-Xmas deal rush.

In the course of this week, trying to juggle multiple balls, I got to thinking about what it was about my job that I really enjoyed because, despite the pressure of managing various client demands, annoying deadlines and the usual last minute issues, I was in a great mood and since I do not celebrate Xmas (and am not gonig away this year) it was not connected to the impending holidays.

There are lots of reasons to enjoy my job - the rush of a deal, the intellectual rigour, the large sums of money involved, the social interaction.  My conclusion was that I enjoy my job because I provide a service to someone and if I provide that service in an excellent way and, hopefully, exceed the recipient's expectations I feel good about myself.

That is what I did this week.  I had a number of transactions with ludicrously tight timescales even the client was doubtful were realistic and yet we delivered.  We worked together as a team and produced the result the client wanted in a timeframe the client asked for but believed was unachievable and all with a smile on everyone's face.

Law is a service profession and therefore is no different to any other service provider such as being a waiter.  You can be slow to respond, surly, dump the product before the customer and blame the chef or the management for things going wrong.  The customer will still pay for the food but he will not have enjoyed the experience (and probably not come back) and, to be frank, neither will you.  But provide an excellent service, show you care about the client and not only will the client be happier and ready to come back for more but you might be happier too.

Exceeding your client's expectations is not just about making the client happy; it is about getting the maximum enjoyment and fulfillment from your job.

Wikileaks, Julian Assange and Denial of Service

Okay, I admit it.  I am giving in to the madness that appears to have overtaken the world by writing a blog with some personal views on the recent goings-on in cyberspace and the real world.  I have been considering writing something on the whole episode for a few days but it was this BBC article which pushed me over the edge.

Let's get one thing straight - I am not a human rights lawyer, public or private international law lawyer nor a criminal lawyer and this blog is only tangentially related to law.

What was it in the BBC's article that made me blog?  It was this:

So far the DDoS attacks have failed to take any sites offline although that is not the point of the attack, according to Coldblood.

"The idea is not to wipe them off but to give the companies a wake-up call," he said. "Companies will notice the increase in traffic and an increase in traffic means increase in costs associated with running a website."

Coldblood admitted that such attacks "may hurt people trying to get to these sites" but said it was "the only effective way to tell these companies that us, the people, are displeased".

Coldblood are guilty of a crime which, if and when perpetrated by the governments they so clearly detest, they would denounce - that crime is claiming to speak with "the people".  That is rubbish; "the people" are not represented by the vocal minority on Twitter and Facebook.

Julian Assange and Wikileaks has been a topic of conversation all over the country.  But rather than the majority of people being delighted with the information being leaked and disgusted at the arrest of Mr Assange the reaction has been quite the opposite amongst many to whom I have spoken.

On the subject of the leaks, the reactions that I seem to hear range from "I don't really care" to "How bloody stupid".  The point is that none of the disclosures have been earth shattering in terms of the information.  What they have done is potentially destabilised the world and made it a lot harder for countries to manage their diplomatic affairs in a sensible manner.  We all know (or at least anyone who is interested knows) that Saudi Arabia is more afraid of Iran acquiring a nuclear weapon than it is of Israel.  Iran knew it as well.  But because nothing had been said publicly all could carry on acting like friends.  Now that the feelings are public the risk is that Iran will feel compelled to be more openly aggressive towards Saudi Arabia and the Saudis may feel less able to be supportive of the West; how is this in anyone's best interests?

In terms of Mr Assange himself, his lawyer Mark Stephens was very quick to claim that Julian had been trying for some time to address the charges against him and to meet with the Swedish prosecutor.  If that is the case then why has he been in hiding in England?  The fact is that he has been charged with a number of rather serious crimes.  It would make a mockery of our system of justice if we bowed to pressure from the internet not to force him to face those charges in the country in which he has been accussed.  It is for the prosecution to prove him guilty and not for him to prove his innocence but allowing him to escape the charges on the basis that it could be some conspiracy by governments is an insult to the justice system of Sweden.  In any event, as Wikileaks has made quite clear, it is a lot larger than Julian Assange and the disclosures will continue with or without him.

So I remain unconvinced that the charges against Mr Assange are just a ruse to try and shut down Wikileaks although I do not suggest that he is guilty; that is for the criminal justice system to decide.  I do not think that Wikileaks has acted in my best interests in releasing the information it has into the public domain and, most importantly at all, I think Coldblood is wrong in claiming it is speaking for "the people" when in fact it is speaking for a tiny minority when the rest of the world would frankly rather get on with their lives without unnecessary episodes such as this.

JJB warns of financial breach - a threat to the CVA model?

JJB warns of financial breach Online Property Week
This was the headline which is sending shivers down the backs of Landlords across the country whether or not JJB is actually a tenant of theirs for a number of reasons.

1. JJB, whilst not a bell weather for the retail sector per se, is a large enough retailer that if it is failing to perform it is indicative of issues in the market generally.
2. JJB, utilised a Creditors Voluntary Arrangement (CVA) to much fanfare in 2009 - one in a line of large retailers to do so.  At the time I considered the reasons why one CVA is successful whereas another is not.  Now that the outcome of that CVA is not looking positive Landlords may be concerned regarding the other CVAs which they approved.

As a real estate restructuring lawyer the potential failure of JJB to turn itself around despite the CVA creates an interesting dimension.  The whole argument of a CVA is that the creditors overall will get a better deal than if the company entered administration or liquidation.  Creditors are asked to forgo a proportion of their debt and/or agree revised payment terms in order for the company to continue trading.

For landlords the deal has always been a difficult one.  In a retail CVA there are always some properties the company wishes to exit and the landlord is forced to decide between accepting a liquidated damages offer or taking its chances in an insolvency.  It seemed that JJB (and others like Focus DIY and Blacks Leisure) had managed to work out the correct level of compensation to pay landlords to get them to agree the CVA.

However, if companies that have been through CVAs begin to fail again a couple of years later landlords are going to be left asking themselves whether the problems facing the company where not really the leases but rather the management or the business itself.  Bearing in mind the cost to landlords of considering the CVA terms one wonders whether some will come to the conclusion that it is just not worth it and refuse to back CVAs in the future.

Only time will tell but for now anyway, all JJB's landlords are not sleeping quite so soundly at present.

Fee cutting is no way to emerge from recession | Analysis - print | Property Week

Fee cutting is no way to emerge from recession Analysis - print Property Week

Giles Barrie, in his editorial this week, raises some interesting points regarding the effects of fee cutting in the agency world.  The same phenomenon can be seen in the legal world for the same reasons and with the same fundamental risks to buyers of legal services.

Cutting fees is bascially an attempt to grab market share by low balling now with the hope that the client will continue to instruct you when times are better and you charge more for the same service.  Understandably many buyers are attracted by the low rates on offer but before rushing to buy the cheapest service they do need to consider what they are getting at such a cheap price.

Some issues include:

• Many of the problems that are being identified now with properties should have been spotted previously but due to time, cost and deal pressures they were not.  Taking the cheapest quote is simply repeating the mistakes of the past.  Now is the time to ensure you are getting the best advice for your circumstances as a mistake now could cost a lot more than the few pounds saved in fees.
• In order to remain profitable a firm offering a cheap quote will be forced to push the work down to the lowest level possible.  I have heard of one firm hoping to put in place data capture systems which would enable all leases reviews to be carried out by trainees.  No disrespect to trainees but no matter what technical systems you have an inexperienced trainee is unlikely to spot where a rent review clause is defective or whether there might be a Good Harvest issue in the drafting.

From the suppliers' side such low balling also creates issues:

• It creates the impression that little or no skills are required for the work - if this was the case then law firm's indemnity insurance would clearly not be as high as it is!
• It demoralises staff who know that they are effectively providing a service for which the clients are not paying.  They constantly feel under pressure to cut corners to improve profitability further increasing the risk of negligence and resent the fact that they cannot do a proper job as the fees do not allow it.
• Do you honestly believe that a client having instructed you because you were cheap will stick with you when you hike your prices on the basis that you are going to offer the same service?

Therefore, as Giles notes in the agency world, fee cutting in the legal world is damaging for both customer and supplier in the long run although I suspect will continue to be the case as many fail to recognise the risks.

Contracting with a UK REIT - does it make a difference?

REITs hit the UK landscape in January 2007 and now many of the best known names in the UK property world are REITs - Land Securities, Hammerson, Great Portland Estates, British Land to name a few.  As a matter of course there are certain questions one always considers in terms of the party with whom you are contracting.  It is important to consider whether they are executing the documentation correctly and, indeed, their power to enter into the transaction.  If it is a foreign entity the obtaining of a legal opinion is advisable.

REITs add something different to the mix and the risk to a party contracting with a REIT is that without knowledgeable legal advice one can be exposed to unnecessary risks or, indeed, lose out on potential advantages.

The rules governing REITs are complex and affect not only the REIT itself but also those with whom it contracts.  A REIT's business is split into a Property Rental Business (PRB) (which must be at least 75% of its total income) and the remainder being its Residual Business.  PRB income is effectively tax exempt (there is 20% withholding tax which exempt investors can reclaim) whereas the income from the Residual Business is taxable at 28%.

It is beyond the scope of this blog to go into detail (nor would I wish to give away trade secrets quite so easily) on the potential issues and pitfalls that can arise when dealing with a REIT but some highlights include:

• the sale of shares in an SPV property company by a REIT will be a Residual Business which may have negative tax consequences
• the base cost of a property in an SPV once owned by a REIT may be higher or lower than the SPV paid for it
• the sale by a REIT of a development within 3 years of practical completion is likely to be a Residual Business which again has negative tax consequences
• whilst the PRB part of the REIT does not pay tax it still benefits from capital allowances to reduce the dividend payments it needs to make so REITs will not simply give these up
• Joint Ventures with REITs raise all sorts of governance and tax issues and potential advantages

As mentioned the REIT legislation also provides potential opportunities as well.  Therefore it is key that when you are getting into bed with a REIT you know what those opportunities are and how to exploit them for both parties' benefit.

"Why do lawyers exist?", by Tim Bratton

In his first ever blog, Tim Bratton, GC of the FT says it all when he says ". . . successful lawyering is all about getting clients from A to B over whatever hurdles might lie-in-between" and not, as some lawyers believe, to put the hurdles in the way of the client!

You can read his whole blog here:

thelegalbratblawg: The First Post

Thanks Tim for reminding all of us of the important facts.