The rationale for this rule is that the referral fee would work a conflict of interest for the attorney working on the transaction where he / she would be motivated personally to have the deal close to get a commission instead of blocking a deal if such action was in their client's best interest.

The opinion does have an exception though. The exception is that if the attorney's clients gives informed consent to the referral fee and the attorney transfers the referral fee to the client such an action would be acceptable.

Therefore, the takeaway is an attorney cannot benefit financially in any way from referring a broker in a deal in which the attorney is working in a transactional representative capacity. Instead, the attorney must have unabridged motivation to guard the real estate client's best interest.

Yet, I was called this morning by a contractual purchaser of a property where the contract allegedly does not include any right to cancel for the seller if the lien holders will not release their liens by way of an accord and satisfaction - the traditional short sale scenario. The contractual purchaser wants the property without any liens. Now what?

I suggested that the seller should be able to sue for either specific performance (forced sale with paid off liens) or for benefit of the bargain monetary damages. Yet, I cautioned that not only are the terms of the contract operative and may preclude either remedy, but that this is not often frequented territory and its therefore unpredictable.

What do you think? Should the seller just be able to cancel the contract? Or, should the seller have to reach into their own pocketbook to satisfy existing liens? What happens if there is nothing in that pocketbook?

Remember law is not often easily predictable and many different factors will play into the result.

Maybe, the easiest solution would be for the potential purchaser to just go to the beach and forget the whole thing. It is awfully hot to think of anything else.

What do I mean?

Often agents, landlords and tenants are so accustomed to how something was previously done that they forget that the purpose of a lease, which is a contract, is to tailor rights and remedies as the parties deem fit in their own unique situation.

What is a guarantee?

In essence, a guarantee is a third-party insuring the debt of a first-party to an agreement. Yet, the case that I am currently reading gives great insight to the job of a real estate agent. This case is about a guarantee of only the first $50,000, not the entire lease, which in the case damages were awarded in the amount of $510,510; a substantial difference. Here, the tenant was liable for the entire $510,510, but the landlord could only collect from the guarantor the first $50,000 and nothing more.

What is the lesson?

A guarantee doesn't need to be for the entire amount contracted between the parties. It can be for whatever amount provides the landlord with adequate additional security in the deal. A guarantee is a contract in of itself and its terms should be carefully negotiated. The key is to be creative. In this case the guarantee was limited to $50,000 even though the language also included attorneys' fees. This means that even though the debt was over $500,000 and attorneys' fees were a lot more, only $50,000 was guaranteed. We often forget in our business to explore the why instead of the what. Yes, landlords will say we want a guarantee; the what. Yet, the question is why? For additional security in the tenancy because the tenant is not credit worthy? Maybe. Or, maybe its just to motivate the tenant not to default because they need a push. If that is the case, getting a guarantee from someone the tenant respects and is ashamed to let down would be enough even if that person is not wealthy enough to guarantee the lease and maybe that person will not need to be on the hook for the whole amount to accomplish this if its the only way to convince the person to provide a guarantee.

The lesson of this blog is to always not assume that something means what you think it does. A guarantee, can be limited to a Good-Guy Clause where the guarantee only covers use to date of exit from the premises or a guarantee can, more importantly, mean anything that the negotiating parties want it to. Stop trying to speak like a lawyer and use terms of art. Instead, think about what the parties want to agree to by talking to each of them about their concerns and desires and find the terms of art to reduce it to writing later or better yet, hire a good lawyer to do that later.

Remember, contract law is party defined law. So define the law that you want. Real estate agents' jobs in lease negotiations is to spark conversation, to encourage ideas and to help find a meeting of the minds. Good luck and stay cool, its hot out there.