Real Estate Transaction Planning
A well-known music conservatory had been in the same location in Los Angeles for over 25 years. The school was operating under a month-to-month tenancy and had been so for most of the 25 years.
Quite suddenly, and without any warning, the building in which the school was located was sold. The school then received a 30-day eviction notice from the new owners. This precipitated months of litigation which ultimately resulted in the new owners backing down and granting to the music school a lease extension for six months in which to find a suitable new location. The school was represented by Mr. Dallinger.
The conservatory relocated to a new facility and signed a five year lease. Within the first year of occupancy, representatives of the City arrived at the new facility and cited the school for having too few off-street parking places to operate a school. This precipitated approximately four years of administrative and judicial proceedings in which the school was attempting to obtain a variance from the applicable parking ordinance and in which the City was trying to prosecute the school for a criminal violation of its zoning ordinance and to shut down its operations.
After no success in a long series of administrative hearings held under auspices of various agencies of the City itself, the conservatory, represented by Mr. Dallinger, initiated a judicial action against the City in order to have the rights of the parties determined and the City enjoined from its capricious actions against the school. Shortly after the action was filed, broad discovery was propounded by the school. The City’s response was to deny that it was obligated to respond to the demands for documents, etc. The presiding judge ruled that the City did indeed have a duty to produce its internal files which would have shown that it had discriminated against the conservatory by permitting other music schools located within the City to operate with insufficient parking for many years. Upon the judge’s ruling, the City, unable to justify its historically inconsistent and erratic actions, offered to settle the matter by permitting the conservatory to remain in its premises until the expiration of its lease. The parties so agreed.
The school then set about a lengthy effort to find suitable facilities with adequate parking, not an easy task. After several negotiations concerning potential locations, during which the school was forced to relocate on an interim basis twice, the school finally found a permanent location with more than adequate parking and space available and entered into a 15 year lease. The build-out of highly specialized tenant improvements was then commenced and, after a year of planning and extensive construction, the conservatory re-opened in sparkling new quarters custom designed for a music school and with plenty of parking.
To the credit of the conservatory and its teaching and administrative staff, never did their enthusiasm for their mission to bring music into the lives of young people wane. Their student body has remained virtually intact throughout and, today, the school enjoys success in its new, beautiful location.
Mr. Dallinger’s commitment to this matter remained strong, effective and unrelenting throughout the entire period of approximately seven years between the original threat of eviction, the City's ill-conceived persecution, interim re-location, and the anxiety and extreme cost of negotiating a new lease, construction contracts, the planning process and the actual construction. As a result, young people and adults are still served by a wonderful music conservatory with a 39 year national reputation for excellence.
Two small law firms had occupied the same premises for over 15 years. At one time they owned the building in which they were located. After the sale of the building, they became master tenants with a lease for several years.
Upon expiration of their lease, they expected to be welcomed back into the building with open arms on a lease renewal. Instead, the new landlord had an overblown idea of the rental value of the building and demanded inflated rent from the lawyers. They, in turn, hired real estate counsel to represent them in their negotiations with the new owners of their old building. Things went nowhere. Lawyers for the lawyers were negotiating with the lawyers for the landlord. Lots of “lawyerspeak” – no progress.
As the expiration date for the lawyers’ lease drew nearer, Mr. Dallinger, in an effort to facilitate negotiations, spoke to the landlord candidly and recommended that he speak directly to the tenant lawyers rather than working through outside lawyers for each side. The same recommendation was made to the lawyer tenants. Each side was reluctant at first to speak directly to the other side and insisted on maintaining the buffer of their respective lawyers. No progress.
Ultimately Mr. Dallinger asked the lawyer tenants if they would at least accept a call directly from the landlord if the landlord was willing to initiate such a call. They agreed to do so. Then he persuaded the landlord to call the tenants directly by explaining that, though they were lawyers themselves, they were not real estate lawyers and were really laymen when it came to negotiating commercial leases. The landlord’s fears were thus lessened. In addition, Mr. Dallinger pointed out to the landlord that if they did not become more flexible in their approach to the tenants, they would end up with an empty building owing to the fact that many of the tenants other than the lawyers relied upon the facilities provided by the law firms and that if those facilities disappeared along with the law firms themselves, the independent tenants would also of necessity disappear.
The landlord worked up his courage, with his own lawyer’s consent, and called the lawyer tenants directly and negotiations finally proceeded and progress was made almost immediately.
The lesson was that, though a lawyer himself for over 35 years, Mr. Dallinger recognized the limitations of indirect negotiations through representatives and how important candid, direct communication between the real parties in interest can be in certain circumstances. But for Mr. Dallinger’s earnest persuasion of all parties to deal with each other directly and openly, all parties would have experienced unnecessary inconvenience and expense. Instead, the interests of all parties were well served and business was able to continue uninterrupted in the normal course.
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