Steve Everbach: Strict Interpretation or Equitable Solution?

Steve Everbach

Commercial real estate is an industry where there are written agreements during many stages of a transaction. Examples include exclusive representation agreements, commission agreements, letters of intent, purchase and sale agreements, and leases. These documents are created and signed for a reason: to detail the parties’ intent and understanding of the business terms.

If all agreements were written clearly and the world functioned in an orderly manner, there would be less of a need for civil courts. Unfortunately, that is not the case.

So, when things don’t go exactly as planned what does one do—stick to a strict interpretation of the agreement or pursue an alternate solution? Some say to stick to a strict interpretation no matter what, which one has the legal right to do. Others advocate considering alternatives, which sometimes may lead to a more equitable solution.

I tend to fall on the equitable solution side, as our industry is based heavily on relationships I also want to feel good about myself when I interact with others. So when faced with these situations, and they occur frequently, I try to look at the impact of a decision from a fairness standpoint and the potential effect on future relationships.

If a tenant is a day late with rent, does the landlord immediately start eviction proceedings? The lease may give you that right, but most would not take that course of action. If a commission agreement requires a lease to be signed by a date certain and that date passes, do you follow a strict interpretation the agreement and not pay a commission, even though the proposed recipient added substantial value? There are many instances where a strict interpretation of a contract will produce an inequitable result and may tarnish future business opportunities.

When faced with these dilemmas, my advice is to carefully consider the long-term impact of your decision. People appreciate acts of fairness, as well as recognition of their contributions. These gestures can create goodwill, open the door to future opportunities, and enhance one’s reputation for fair dealing.

Despite an agreement giving you the right to follow a course of action through strict interpretation, sometimes the best solution may be an alternate path—especially if it is the right thing to do.