Over the last weeks many situations have arisen where people are unhappy with the ending situation of the contract. Not surprisingly this is the first time and a result of having more than 100 clients now at Iwi studios with a range of different contract types. Some Written by us and some by the building owners we represent. Through the years i have also been the client and had my own set of surprises, some in hindsight i should have realized and some where very real abuses of power. No matter who has made the contract or who has signed it, some similar situations come and maybe more importantly there are some basic things we can do to avoid this. While some companies dealing with client contracts always expect the worse when a contract is finished, i prefer to at least share some observations and help prepare people for a bit awareness when it comes to signing a legal document.
This in no way has any effect on any of our contracts legal or otherwise. Its meant as a tool, to inform and suggest options. Please keep in mind that consulting your own lawyer in legal situations is the advised thing to do and only there can you truly get case specific information that will help you legally.
Consider what a contract is for a moment. Think a formal legally binding agreement where two parties establish an understanding about a specific situation like work, a sale or tenancy. The document captures all the important things for both parties and can act like a reference for how they relate to each other. It incorporates clauses which capture in greater detail specific subjects important to the overall situation and document. If there is a misunderstanding the last signed contract is the place to go for clarity. BUT importantly the document is not a gentle mans agreement but intended to be enforceable by Law. There are a number of factors that make a good contract but generally its held that once signed, its legally binds. As someone signing you are taking responsibility to uphold your end of the agreement.
1. Clauses to take note of (specific to tenancy agreements):
- Who is on the contract: As a tenant its important to realize who it is you are dealing with. Is it a company or an individual? Can you see them on your local government handle register or Google then to see what comes up. Check the personality of who you are dealing with as this has more relevance than you might think. Unless you want to go to court with every dispute, this person you deal with will be part of the mediation. In the case of a bigger company, you might deal with multiple people unknown to you at the time of signing. Are you signing together with someone or alone?If you sign together with someone as a partnership in relation to the new landlord you are basically saying you trust this person to fulfill all the requirements with you. Its not enough to do half but in the end if your partner is unreliable then you will have to meet the full agreement with the landlord.
- The Basic agreement: This should be as specific as possible. Sometimes we think if we leave the contract open in certain areas it will give us wiggle room. But realize if you have space to interpret so does the other party! For tenancy contracts, dates, times, the space itself, monthly price, whats included in this, how its paid, who is it paid to, how do you stop the contract.
- Force Majeure: Under what conditions can your landlord stop the contract, this is relating to Force Majeure or the unknown circumstances that usually don’t arise but can. They are out of the control of those who have entered into an agreement. For example i include that if there is a fire or flooding, or in the situation where my property is being damaged then i have the right to terminate the agreement directly. Termination triggers are also good to establish. If someone causes major damage to my property like breaking windows, mirrors, stealing a sound system or destroying the wooden floors we often have, these would be included in a termination clause. Touch wood, i have never had to use this one to date.
- Dispute resolution and damages control: Often forgotten clauses but essential to clarify the process if something were to happen. With the best of intentions situations change and this can be for the renter as well as the landlord. It means that at the start of the contract we are usually closer in our agreement than 6 months into our working agreement. Sometimes its advisable to renew the contract and update it. But keep in mind many big organisations won’t want the hassle of this, and once you sign you are bound by it.
3. Types of signers
As a manager of multiple locations i come across two basic types of contract signers. Those who take it very seriously and want to read and discuss every clause, hopefully leaving the contract signing meeting with clear idea of whats expected all round but more often they are just happy the ordeal is over and they can enjoy their new space. And then there are those who simply sign without much real awareness of what they actually have to do for the contract. In these cases i take it on myself to explain as much as possible what it means to them, but i experience the details don’t really land into a real sense that this document is legally binding and they will be expected to conduct themselves in a way conducive to the contract. There is also a small group hugely in minority that take a contract seriously, leave having understood and taking responsibility for what is included in the agreement. I love these people as there are very few misunderstandings and no surprises when they stop a contract.
Why is this important? Well ask yourself as a person signing a contract: Do you understand intrinsically what the clauses mean and the expectations of you and the other party involved? Do you realise that by not understanding you put yourself at risk of surprises? i have put below a couple of case studies to show what happens when people indifferently sign contracts of sign when they actually don’t understand.
Case study: Basic situation is a big group of artists sharing an atelier, think 16 people. Legal situation is that a contract has been signed by one head renter and this is the person i as building manager and legal representative of the building owner, liaise with over anything legal, financial or problematic. Including things done by those who are sharing their space. So while the contract is directly made with the building owners name on it, i can officially sign the contract in this capacity. All finances and legal agreement is made directly with the owner. Humane situation is a building manager who is trying to help the group in question, with the idea of making a community building flavour in the building. A large group not properly informed by their head renter and multiple lines of communication to each other, the head renter the building owner and the manager. Lastly the head renter took the signing of the contract seriously but in my opinion didn’t intrinsically understand a word of the agreement and how this would affect day to day running of the space he rented. Mainly that he takes the responsibility for any third party people who are brought into his rented space.
So you now have a pretty complex situation with multiple parties involved formally and informally. You have 4 types of people in this situation: the building owner, the head renter, the building manager and the lastly the third party renters under the jurisdiction of the head renter.
- Basic contractual and legally binding agreement is between the Building owner and the head renter. The building manager as legal representative of the building owner acts in the stead of the building owner. Communications about the contract should go between the Building manager and the head renter.
- Building manager is responsible for staying as true to the wishes of the building owner as possible, checking anything questions or things not clear in the contract before continuing.
- The head renter is responsible for communicating with the Building manager about all things necessary for keeping the contract in tact. They are also responsible for any third parties they bring into the space including ‘in house agreements’, communications of important updates from the building manager and correcting any behavior from third parties that’s goes outside of the contract they have signed.
- Building owner is responsible for providing a quality contract that is clear and workable for both parties. They have the end responsibility in disputes and working with the head renter to clarify things that aren’t clear in the contract. This is a last resort and only occurs when there is an actual dispute over the contents of the contract that goes outside of a feasible interpretation from the building manager.
- Third party renters communicate with the head renter about all matters. the head renter is the one defining the way they can use the rented space, the agreement setup for this. It is suggested that as a third party renter you ask to see the original contract of the head renter to know what the conditions of the space are and within this make your own working agreement/contract to protect you in strange situations. Its also advised to seek contact with the building manager if you are unclear about whats expected of you. But in the end your agreement is with the head renter and the building manager has no legal responsibility towards you personally. The building manager also has no right to act on your behalf in disputes between you and your head renter. But with a good manager they will give time to help where they can to guide the process and find solutions.
So you can see that in a complex situation things can go wrong if expectations are not in keeping with the contract and actual legal situation. This is usually due to a lack or or poor communication between the different parties. Imagine that the third parties expect same rights as head renter and head renter doesn’t take on their responsibility to manage his third party renters expectations through adequate communication. Head renter also doesn’t communicate with the building manager. The building manager being too helpful in 1-2-1 contact which gives all levels of renters a feeling of expectation that are met and not met. But all in all when we come back to the contract its clearly stated how we work together. I have had a love hate relationship with contracts over the years but coming more and more to the feeling that a good contract protects everyone involved. While i try to inform people about what they are signing its really important that the Signees take time to understand and truly give there agreement.
3. Contract beginnings and ending
With contract beginnings is a wonderful moment for all concerned. The one renting out the space is happy to have it rented and the one signing for the space is full of hopes for their new promised land. Its a time of sincere and insincere moments leading to the signing of the contract. The natural growth and change of individuals and organisations over time mean that the longer a contract is in place or where there were misunderstandings, the Signees feel and test the boundaries of a contract. Whether quickly or a long time passes, the boundaries become so strong as the lead to the stopping of a contract or the need for a new contract to be negotiated. Stopping of contracts immediately shows up all the misunderstandings of the time that lapsed and any frustrations felt by both sides. Renegotiation of a contract is sadly less used and probably because it asks a lot from all parties involved.
As a manager dealing with hundreds of contracts i find this situation interesting. Personally i have a feeling of dread when someone stops a contract, mostly because there is suddenly a void of unknown about how this situation will be completed. I would really like to find a way to ease the process, aid the process of understanding the agreement without being too helpful which raises strange expectations rather than the help being appreciated.
As someone who has also been a renter of buildings i understand now how important it is to not get too nervous about contracts, i was in the take a contract seriously group but leave without understanding everything. Particularly when dealing with dutch contracts. A contract is made for a legally binding reason and everything inside it counts.
I worked for one tango school here in the Netherlands who asked me to sign a gentle mans agreement that wasn’t a contract but turned out to be legally binding because i niavely signed the thing.
Another situation i experienced was a contract that was so open and unspecific that the building owners kept putting more and more restrictions on what we could do in our space. This is my responsibility as much as theirs, i now ask that clauses are changed and defined to meet my needs and if not then we at the very least discuss the clause. I would also in future record the discussion as contracts can be verbal as well as a document. we often forget this as verbal agreements are hard to prove. Recording the conversation is a good way to at the very least ensure further understanding of what has been talked about.
A third situation i have been in was where a contract was simply stopped by a big organisation who hadn’t realized that parties in the contract mean actual real life parties and what this entails. After we had invested in a great setup and made a beautiful new location they started to make problems of small things that if sorted shouldn’t have been anything more than that. We did more than we should of to return the space as we found it according to the photos provided by the owner. Their building manager agreed that we should have 100% of the deposit returned after we asked to do yet more things to ensure a good handover. The owners wanted to keep the deposit because of damages they thought they had incurred. When it came down to it this was in my opinion completely made up. Its a hard decision to make but i got a lawyer to help me in this case. The lawyer cut through the crap and made it clear that although i was only a renter and Zzp’er that they needed to take me seriously and return the deposit i gave to them at the start of renting. 2/3 of the deposit was returned, 1/3 of which i used to pay the lawyer.
In conclusion i would suggest that all who are busy with making and signing contracts should get informed. Relief stress by knowing what decision you are actually making when signing a legally enforceble document, often with people you don’t know. If you are not clear don’t sign, if its going to stop you from doing what you need to do, don’t sign. Negotiate, clarify and be proactive in seeking advice from a lawyer if necessary.