The United Retirement legal department and Porter Wright agreed to a separate fixed fee for a number
of lease negotiations. When structuring a fixed fee for review and negotiation of leases, the firm raised
concerns about the unpredictable nature of challenging lease provisions and onerous one-sided leases
— that is, certain lease provisions (escalation of rent clauses, building allowances and the cost of tenant
improvements, and generally onerous leases in favor of the landlord) that may cause the firm to spend an
inordinate amount time in negotiating the lease. More importantly, the negotiation of these challenging
lease provisions could cause the firm to spend more time than budgeted.
Porter Wright and United Retirement developed a Risk Chart to address the specific risks as a
mechanism for managing uncertainties relating to a fixed fee engagement. After noting the fee, scope
of the engagement, decision points and makers in the Risk Chart, the parties documented the risks,
consequences, gave the risk a probability, mitigation strategy, triggers and time for a project review. As a
result of completing the Risk Chart, United Retirement and Porter Wright were able to negotiate a fixed-fee arrangement that addressed United Retirement’s need for predictable legal expenses while allaying
Porter Wright’s concerns regarding the time required to negotiate onerous lease provisions.
APPLYING VALUE LEVERS
For routine securities work, the firm tracks hours and submits shadow bills to help determine the
appropriateness of the retainer. If the billable hours exceed the fixed-fee amount, then the company is
responsible for 50 percent of the excess. Similarly, if the billable value of monthly hours worked is less
than the fixed-fee amount, then the company will be provided a discount of 50 percent of the amount
minus the fixed fee.
• Time-consuming issues such as escalation of rent clauses,
reimbursement of a building allowance or the cost of tenant
improvements upon default and termination of a lease agreement
• Completely onerous lease
Consequence • Result in more time spent by firm than budgeted
• Time-consuming issues have a 70% probability.
• Completely erroneous lease is unlikely and only a 5% probability.
• Develop points and position with respect to time-consuming issues
in advance and specifically address the most problematic issues in
advance of a LOI or term sheet
• Rely on LOI or term sheet provisions to help reduce time on onerous
leases. Also, company to share in overage above the fixed fee
on completely onerous leases. Parties to review and agree after
completion of the lease.
• Approach for this item applies to all leases
• Upon notice from Partner after initial review of lease
• CLO and partner to review engagement after completion of lease
project to determine effectiveness and examine whether there are
any areas for improvement