I love football, and I love being a lawyer. At least you and I know that we probably have at least one of these things in common.
Football is a uniquely American affair, as is the desire to avoid calling a lawyer until it’s absolutely necessary.
Unlike football, there isn’t always “next season” to look forward to in the business world. A mistake can have repercussions in the future, and you don’t get to start over next year with a clean slate.
So how do I help businesses prepare for “next season” you might ask?
I help small business owners develop strategies based on my experience helping small business owners from incorporation to selling their business and everything in between.
These strategies reminded me of the plays in a football game. There’s an offense, and a defense but their tactics are similar – address the matter at hand and act accordingly.
I realized that knowing the X and Os of a Small Business Legal Playbook could be incredibly helpful for my clients, as well as for small business owners in general.
Each week, through the rest of the season I will be providing you plays from the 2016 Small Business Legal Playbook. You can sign up to have each week sent to you at www.smallbizlegalplaybook.com (or whatever domain name we pick.)
(Also SanDiegoBizLawyer.com is available, do you think I should grab it?)
Each play will talk about the offensive strategy and the defensive strategy. An offensive strategy is appropriate when there isn’t an active problem yet, but we want to address it before it ever becomes a problem. These problems are usually much cheaper to solve than active problems, but require businesses to enlist an attorney to help
Defensive strategies are more appropriate when there is an active problem that’s identifiable and we need to address it as quickly as possible to prevent the situation from.
Play 1: “The Commercial Lease”
Let’s kick off with our first play: The Commercial Lease.
Many small business owners come to me with a copy of the commercial lease their prospective landlord has given them. They want to know whether or not the lease is fair, and if not how best to negotiate with the landlord.
The commercial lease is a potential legal mine-field for a business owner, and part of the problem is the perception that a commercial tenant has rights similar to those a residential tenant may have. Unfortunately, commercial leases allow you to waive rights a residential tenant cannot, and this perception can lead to problems down the line.
So just like a quarterback surveying the field, you need to take what the defense gives you and work with what is in the lease. You aren’t likely to get significant changes but most landlords will be reasonable on some of the terms. So you have to figure out which parts of the lease are worth fighting for and pick your battles.
One of the largest issues a client has faced with their commercial lease was when a fire caused extensive damage to his store, destroyed equipment and merchandise, and closed the business for several days during the holiday season. The fire looked to be caused by internal wiring, but my client had signed a subrogation agreement.
A subrogation agreement in layman’s terms prevents a tenant from suing their landlord or filing a claim with their landlord’s insurance for any claim, even a claim arising from something that the landlord is to blame for. In this situation, there was substandard wiring, that was not up to code, within the walls. The tenant had no way of knowing that this wiring was in the building, but it didn’t matter. He was barred from suing his landlord or filing a claim against his landlord’s insurance. Instead, he had to file a claim with his insurance, and his policy had a much smaller limit than his landlord’s.
Defensive Strategy: as the problem already existed and the lease was still in effect I counseled my client to consider any possible loop-holes that could allow him to get around the subrogation clause. If there wasn’t a pressing issue of the fire damage, I would have told my client the best defensive strategy would be to increase his insurance policy limits to adequately protect him from a loss that wouldn’t be completely covered by his insurance.
Offensive Strategy: If my client had come to me with an unsigned lease, and wanted my opinion on the subrogation clause, I would have told him that we needed to negotiate to either have the term removed completely, or make it applicable to only specific situations. In my experience, landlords often do not have a problem editing the clause to make allowances for specific situations. If the situation is related to something that a tenant cannot be expected to be able to discover, like internal electrical wiring, you can ask the landlord for an exception.