FRSilva Law featured on CFDA’s ‘Words with Fashion Friends’

I was recently interviewed by Marc Karimzadeh of the Council of Fashion Designers of America, where I sit on an advisory board (advising the fellows of the Elaine Gold Launch Pad program, a collaboration between the CFDA and the Accessories Council).

The information provided in this informal q&a may be helpful to fashion startup founders and designers.

Below is an excerpt from that interview.

• • •

What interests you in working with start-ups?

I enjoy working with start-ups because it allows me to paint on a clean canvas. During my career, I was often tasked with cleaning up years of disorganization at the substantial expense and disruption of a client. Working with a start-up presents a unique opportunity to establish good habits at the earliest and perhaps most significant stages of a company’s existence. While the founders pursue business opportunities, I focus on maintaining the legal integrity of the company and developing its intellectual property portfolio. A solid corporate structure that follows legal formalities, a record of consistent legal compliance, and a comprehensive intellectual property portfolio are attractive to prospective investors, shareholders, lenders and collaborators.

What is the most popular legal issue you see emerging designers running into?

The most popular legal issues for emerging designers tend to center around intellectual property. They may unwittingly spend time and resources developing a concept or a brand that is vulnerable to an allegation of infringement. Likewise, emerging designers may find their intellectual property being infringed, often by a designer that is more established and perhaps better-funded. These situations may result in legal issues that at best are expensive to handle and at worst could break a company before it has a chance to take off.

What do you hope the designers will take away from you as an advisory board member for Elaine Gold Launch Pad?

Creatives and business people often have a reluctance to involve attorneys, perhaps out of a fear that attorneys will unnecessarily complicate matters. However, not working with a competent attorney can present significant issues – some of which are not easy or even possible to later remedy. That said, not all attorneys are alike. Designers should seek out attorneys who take practical approaches to legal issues and understand how to balance risks against objectives. An attorney with significant in-house experience, who can inform without relying on legal-jargon, whose focus is to help his or her client meet objectives, and has a proven track record of identifying creative and legally compliant solutions, is both invaluable and difficult to find. But I want the designers to know that we do indeed exist.

• • •

The entire Q&A can be accessed here.

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Fabio R. Silva, Esq.
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.

10 startup legal do’s and don’ts

Startup clients have often asked me what they should be watching out for, as if I have been embedded with their company for months and can readily identify gaps in their legal protection.

As external counsel tasked with working on discrete projects, rarely is it ever the case that I can immediately start listing out what the client has neglected to get done prior to my involvement. Some due diligence is necessary for that.

So, to answer that question I have so many of my own questions to ask and plenty of rocks to turn over. Because every company goes about everything in their own way, I might find a major gap in corporate governance at one startup and a major gap in intellectual property protection at another.

While I may not be able to answer that question here for every startup, I can at least provide a useful check-list. Every founder should go through this analysis in order to identify gaps; those areas where they may have failed, either partially or entirely, in securing necessary legal protections.  Here are ten:

1. select the right corporate form

The moment founders are spending any considerable amount of time developing a product or service, purchasing domain names, building a marketing plan and/or seeking funding (at any level), they should set up a separate legal entity. I could go into a lengthy monologue as to why this is important, but it would take up valuable space and I would lose the reader’s attention.

Just as importantly, founders should not belabor the issue.

I can usually predict which startup will fail. It will be the one that spends more than an hour trying to decide between an LLC or a C-Corp. Successful founders are decisive, and recognize that they will have to make thousands of decisions their first year in operation.

Deliberating on this issue too long may in fact reveal a hesitancy by the founders to take a chance on this new endeavor. For those indecisive founders out there, my suggestion is that they keep their day jobs and practice feigning interest when a co-worker in the staff kitchenette gets into how excited she is over the wide assortment of flavored coffees offered by Keurig®. Comfort, boredom and stability are not part of startup life.

2. conduct official business through the legal entity

A major reason to set up a separate legal entity is to give life to an entity that is separate from its founders. However, this purpose is defeated if the founders continue to conduct official business as if they are doing so as individuals.

When signing contracts, founders should sign in their official capacity, not their personal capacity. Founders should likewise avoid personally guaranteeing any obligations of the company, unless the deal is vital to their existence and it’s the only way to get the deal done. Even so, before doing so they should seek a written obligation to be indemnified by the company.

When acquiring assets for the company (e.g. trademarks or domain names), this should be done under the name of the legal entity — not the names of the founders. It can be both costly and burdensome to transfer the ownership of assets from founders to the legal entity, and could in fact trigger a tax obligation if any of the assets have appreciated in value while under the legal ownership of any of the founders.

Just as important, prospective investors do not like seeing casual respect given to the legal entity. If they choose to invest, they want to see all the assets neatly sitting in one basket.

3. register trademarks

I am convinced that the only reason some startups wait so long to register their trademarks is because attorneys are scary, as in ‘scary-expensive’. So instead the founders keep kicking that can down the road, perhaps thinking that if the business is not viable they will have saved a few hundred dollars on what would by then be a useless trademark certificate.

Not all trademarks are alike, and some pose greater challenges than others. However, a good distinctive trademark should not be expensive to register, and indeed some founders have done it themselves without the assistance of an attorney. For founders who are do-it-yourselfers, it can cost as little as $225 in filing fees to register a trademark in one class of goods or services and it can all be done online.

Also, headaches can be avoided by choosing a trademark that is distinctive (i.e. not confusingly similar to an existing trademark). This improves the chances of coasting through the trademark examination process and avoiding the need to involve an attorney to get past legal challenges by the United States Patent & Trademark Office or any opposing third parties.

As an attorney, I certainly do not recommend filing for trademarks without the input of an attorney. An improperly prepared application can cause months in delays and result in the need to involve an attorney, at an hourly rate, to make the necessary repairs. The alternative is to abandon the improperly prepared application, but that results in a loss of the filing fees and the priority date of the application.

4. comply with regulations

I am going to safely assume that most founders reading this are only interested in direct to consumer sales over the Internet — at least initially.

While there are savings associated with skipping the brick & mortar route, launching a website that is accessible on a national scale opens the door to a multitude of federal and state regulations. California alone has several regulations that will apply to your website, and some of the strictest, whether you are selling goods or services. Comply with California and you’re close to 100% compliant everywhere else.

There is also increased scrutiny on marketing done through social media channels. It’s not rocket science remaining compliant, so spending a few hundred dollars on some basic legal advice and perhaps also the creation of a social media marketing policy will serve a startup well.

5. do not undervalue terms of use

Everyone ignores the terms of use on a website. That is, until there is a customer dispute. A startup may have sold a few customers on its products or services, only to discover that its terms of use on its website do not expressly specify any limitation on its customers’ rights against the company.

What is the return policy? How long is the product or service warranted? Are full refunds granted, including shipping charges? If a dispute arises, can a customer take part in a class action against the company? Is there a limitation on damages?

With the right answers in the startup’s terms of use, stated succinctly in black and white, the startup will avoid significant costs associated with customer disputes. It is worth the few hundred dollars having an attorney draft terms of use that are custom-made for the startup’s website and quite effectively bring the risk down to a level that is manageable.

6. publish a privacy policy before collecting customer data

“There is gold in that there database.” That database of customers the startup is building could prove to be the startup’s greatest asset someday.  But what good is it if the startup has not secured permission from its customers over the use of their data beyond the specific transactions?

A privacy policy that clearly discloses to customers, at the time they share their data with the startup, what can (and cannot) be done with their data, will create value in the data collected. Only hackers care to deal in customer data that does not come with its associated customer permissions. The permitted use of that data comes from the privacy policy that existed at the time each customer turned over any of his or her personal data to the startup.

That same attorney who is drafting the terms of use can also draft the privacy policy. With a slight expansion of the attorney’s scope of work, the startup can secure another vital piece for its website.

7. work with a good tax person

Founders should work with a good tax person; perhaps one recommended by their attorney. By “tax person,” I do not mean a tax attorney. A tax attorney is only necessary when the company is in trouble with the IRS or some state’s department of revenue.  So please do not confuse the two.

By “tax person”, I mean a CPA or even a sophisticated tax preparer; someone who understands business operations and how they may trigger tax reporting and payment obligations.

This is someone who will advise the startup whether to choose an LLC versus a C-Corp, and whether S-Corp status makes sense (and when it will no longer make sense). It should also be someone with whom the startup checks in regularly, and not just whenever tax reporting is due. In fact, every major transaction or initiative should involve input from a good tax person, who can advise how best to structure a deal in order to minimize tax obligations and likewise remain compliant with taxing authorities.

8. organize your contracts and corporate documents

I have often asked clients for a copy of a contract, or perhaps even just their operating agreement. What I have received in return has often been a bit jaw-dropping. For example: contracts without a counter-signature; contracts with no signatures; contracts without vital exhibits; signed vendor-drafted proposals standing in as contracts; missing contract amendments; and my favorite one of all, no contract at all. If a dispute should ever arise, think of how awkward it will be to ask the adversary for a copy of the contract. I have had to do this, and it’s not easy.

Founders should learn this now and take it with them to their deathbeds:  A contract is worth less than the paper it’s written on if the party wishing to enforce it cannot locate a countersigned copy. Delay deal-signing celebrations until after a fully executed copy of each contract, complete with exhibits, has been received and archived by the startup. Every subsequent mutually executed amendment should also be filed and cross-referenced with its respective contract.

9. involve a generalist attorney

The vast majority of attorneys specialize in one area of law, and they make their money providing very specific advice in that one area. These attorneys are valuable, when a startup has that “one” complex problem.

But what of the startup that needs more generalized and ongoing legal advice, crossing over and into a variety of legal areas? That is when I suggest finding an attorney who has spent a major part of his or her career in-house and tasked with dealing with everything that came his or her way. Aside from being capable of dealing with the vast majority of legal issues that could land on the doorstep of the startup, these former in-house legal practitioners take considerably more practical approaches to solving legal problems. In-house attorneys rarely had the time or the luxury to over-complicate legal matters. This may be because not billing by the hour has a marvelous way of teaching attorneys how to be both efficient and practical.

Founders are therefore advised to look into the backgrounds of all candidates being vetted to handle the startup’s legal work. Those candidates should have a track record of both, providing legal advice and having hands-on experience, and in areas as varied as intellectual property, corporate law, real estate, commercial contracts, and regulatory compliance, to name a few. The attorney should also understand the realities that startups face, namely that there is no reward without having to stomach some risk.

When a letter arrives at the startup, perhaps making a legal allegation, the founders will know to whom it should immediately go for legal attention. This generalist can either handle the matter or identify the specialist attorney who might be better suited.

10. insurance

The founders have by now involved a tax person and an attorney. However, there is still one more individual needed to complete the team of professionals who will be charged with protecting the startup.

Any startup engaged in the sale of goods or services places itself at risk of litigation. In fact, even the startup’s own employees, freelancers or vendors can be a source of liability. For this reason, founders should identify an insurance broker who can assess the risks faced by the startup and assemble a menu of insurance plans that offer varying levels of coverage.

During my time spent as an in-house attorney, I had to file many claims with my client’s insurers. If my clients had not carried insurance, these matters could have cost my clients thousands of dollars in legal fees and the payment of damages. This is all to say that a good insurance broker will direct the startup to the right policies to cover the risks that the startup cannot carry alone.  Carrying the right policies, in the right amounts, is also something prospective investors want to see during their due diligence.


The checklist above is certainly not exhaustive and perhaps not relevant to every startup, but it should give founders some idea of what they should be doing to protect their company and whom to involve. Looking at the company from the perspective of a prospective investor is also useful. If you were about to invest $250,000 in a company, what questions might you ask?

As the startup grows and becomes more complicated, the list will also grow and get increasingly complicated and detailed. The time may even come when the startup will have a C-level suite of professionals responsible for protecting the company, including an in-house attorney capable of quickly identifying and covering gaps in legal protections.

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Fabio R. Silva, Esq.
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.

intent-to-use trademarks: why file early?

Young companies should be aware that they can apply to register a trademark with the United States Patent & Trademark Office (“USPTO”) even before they start using it.  This isn’t news to established companies and certainly not to trademark practitioners, but it is indeed news to many startups.

Why should I file early?

What I have found is that young companies will start investing time and money into a trademark that (a) could perhaps already be in conflict with an existing trademark, or (b) could be taken from them by another company that files first — creating a lengthy and costly conflict.

For these reasons I regularly advise my clients to start the trademark application process early in order to confirm that there are no existing and conflicting trademarks and to establish priority over later applicants.  An early application may also serve as a sufficient deterrence against later applicants.

What is involved in an intent-to-use application?

The intent-to-use application (also referred to as a “Section 1(b)” application) has filing fees identical to an actual-use application (also referred to as a “Section 1(a)” application), namely filing fees of $225 to $275 per class. However, they differ in this key aspect: At the time of the intent-to-use application, submitting proof of actual use is not required.  You merely have to indicate that you have a bona fide intention to use the trademark in commerce.

When you eventually make use of the trademark, and that use matches the use claimed in the application, a specimen proving actual use must be submitted to the USPTO.  This Statement of Use (“SOU”) comes with a filing fee of $100 per class.

How long do I have before I have to start making use of the trademark? 

Subsequent to filing an Intent-to-use application, the USPTO will examine the application to confirm that it meets all technical requirements. This review includes conducting a comparison with existing federal trademark registrations and raising any concerns over a likelihood of confusion.

Assuming the application clears the examination, the application will be published for opposition for a period of 30 days (allowing any concerned third parties to raise their concerns). Passing the publication period without any objections means you now have 6 months to prove use of the trademark by submitting an SOU.

What if I am not yet using the trademark within the 6-month deadline?

No need to worry if your plans to use the trademark were delayed. The USPTO freely grants time extensions. By “freely” I do not mean “for free”, I mean that they do so quite willingly. The USPTO will charge a filing fee every time you file for an extension of time (i.e. $125).  Also, you will be limited as to how many extensions you can secure.  The USPTO usually grants 6-month extensions for up to 5 years.

What if I haven’t yet committed to a particular trademark?

I have found in many cases that clients have settled on a word, but have not yet settled on its appearance (e.g. font, colors and design elements). Not having yet settled on the look and feel of the word, they assume they still are not ready to apply to register their trademark.  This is wrong.

The USPTO allows you to submit an application for the trademark in standard characters (protecting the text), irrespective of the look and feel (which could still be in its development stages).

Later, when you settle on the look and feel of the trademark, you can submit a second application to protect its design elements (if they are worthy of protection).  In other words, do not delay your trademark application if you have already settled on a word but are not yet settled on its appearance.

Your time and resources are valuable, so get things right the first time and protect your hard work.

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Fabio R. Silva, J.D. Stanford Law
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.



Cultural Appropriation and Fashion: Time for a Code of Conduct

I attended a panel discussion last night at Parsons on the subject of cultural appropriation in fashion.*

While the panelists all spoke powerfully, most of what they shared was anecdotal. Their stories were mostly of being that one person in the room who had to speak up in order to stop a train wreck. I believe most POC placed in positions of power can relate.

As an attorney, I was trying to find a legal solution to all this – one that would raise the stakes and take the burden off POC to be the voice of reason in the room. But I don’t believe one exists. This is an ethical issue. And in many ways, violating the ethics or boundaries of borrowing from cultures can have greater consequences than a civil suit. With the power of social media, the damage can be both intense and immediate. Fashion companies are just a few key strokes and hashtags away from a PR nightmare.

What the fashion industry needs is a written cultural appropriation code of conduct. A non-binding code that at a minimum details a methodology that designers are advised to follow in order to avoid cultural appropriation. It is not sufficient to simply tell designers to “Google” each of the design elements of a particular collection before it hits the runway or stores. The only way to get designers to consistently and effectively avoid this minefield is to give them a written code that they can choose to adopt and internalize into their organization.

But which organization or organizations should prepare it? (I ask this question because I honestly do not know.) Writing the code is a minefield of its own. Certainly not everyone would be happy. That said, I don’t think that’s reason enough not to make an attempt and at a minimum issue industry guidelines. Designers can follow them or completely ignore them, but what they cannot then do is claim ignorance.

The panelists all spoke very eloquently about situations they were each in when they had to speak up and inform a client or designer that what was intended to be placed on the runway or in fashion magazine was simply not okay. Clearly, if designers object to a written code of conduct or even guidelines, then they should closely examine the composition of their design teams. Designers should include and expect more diversity on their design teams. And their entire team should be empowered to speak up when something just doesn’t smell right.

*Panelists included Elaine Welteroth, Editor-in-Chief of Teen Vogue; Aurora James, Creative Director of Brother Vellies; Amy Farid, Fashion industry hairstylist; and Anastasia Garcia, Photographer and body positive activist. Kim Jenkins, part-time lecturer at Parsons School of Design, was the moderator.

#FashionJustice #Parsons #FashionLawyer #FashionLaw #FRSilvaLaw #CulturalAppropriation #CFDA #RetailLaw #StanfordLaw

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Fabio R. Silva, J.D. Stanford Law
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.

the Freelance Isn’t Free Act: New York City’s gig economy fights back

cropped-frsilva-law-444x500.jpgWith more of the labor pool moving into the gig economy, a new law protecting freelancers has gone into effect in New York City.

The Freelance Isn’t Free Act (“FIFA”) is a straight-forward piece of legislation that makes it easier for freelancers to file claims against your company. The odds are good that other jurisdictions will adopt similar protections, so adopting a legally compliant approach to engaging and dealing with freelancers should be on your company’s to-do list.

When does FIFA apply to your company?

If your freelancer is domiciled in NYC, the contract is governed by NY law or the work is performed in NYC, you may have to answer to any complaints raised by a freelancer under FIFA.

A “freelancer” is any person or one-person entity your company has engaged to provide services, with the exception of a sales representative, an attorney or a medical professional. This means that the graphic artist, stylist, photographer or web designer you hired could fall under the protections of FIFA.

For FIFA to apply, the value of the services have to be at least $800 over a 6-month period, even if the services are for varied and unrelated projects. In other words, cumulative obligations to pay a freelancer at least $800 over a 6-month period are sufficient to meet the amount-in-controversy requirement.

If FIFA is applicable, what must your company do?

Your company must:

  1. provide the freelancer with a written contract, containing at a minimum (a) the identity of the parties, (b) a description of the services to be provided, and (b) the payment obligations (i.e. amount and timing). (If the payment timing is not included, the law will assume payment terms of Net 30.)
  2. make payments to the freelancer on time.
  3. not condition timely payment on the freelancer accepting an amount that is lower than what was originally negotiated.

Why should your company be concerned over FIFA?

Under FIFA, a successful plaintiff will be awarded her damages and attorney fees. This means the historical barrier to these disputes has been removed. Plaintiff’s attorneys will now express an eagerness to represent freelancers, sensing a much better chance of getting paid if the matter has merit. Your company could therefore see an uptick in formal claims brought by freelancers, represented by hungry and aggressive counsel.

Also, under certain circumstances the freelancer will have the right to be awarded double the damages alleged. In addition, where there is evidence of a pattern or practice of violations, there could be a civil penalty up to $25,000.

While the amounts here may be small in comparison to your company’s overall labor expenses, keep in mind the public relations aspect. The damage caused to your company’s reputation for having stiffed a freelancer could be significant. In the early life of FIFA, companies caught up in these claims could be used as examples in the media by the Department of Consumer Affairs.

How can your company avoid liability under FIFA?

In order to avoid liability, do the following:

  1. have your attorney prepare a template freelancer agreement and make it your company’s policy to use it every time you hire a freelancer.
  2. pay your freelancer the negotiated amount and make those payments on time.
  3. do not retaliate against a freelancer who has filed a complaint against your company under FIFA.
  4. do not ignore informal demands made by freelancers for non-payment or failure to pay the total amount negotiated.
Given the increased use of freelancers in this gig economy, your company should take the time now to prepare policies and procedures on engaging freelancers. Include within those polices and procedures the steps to be taken, not only to avoid mischaracterizing an employee as a “freelancer” (another and perhaps more significant land mine), but also to avoid FIFA liability.
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Fabio R. Silva, J.D. Stanford Law
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.

social media endorsements: 4 easy steps to compliance

cropped-frsilva-law-444x500.jpgThe Federal Trade Commission (FTC) through its Acting Chairman, Maureen K. Ohlhausen, has been both vocal and transparent over the FTC’s more relaxed approach to certain regulations, taking a cue from the new administration. However, the FTC continues to aggressively pursue retailers of consumer goods and services for misleading advertisements in social media. This includes failures by influencers on social media to disclose their connections to the brands they endorse.

In a press release issued April 19, 2017, the FTC disclosed that it had “sent out more than 90 letters reminding influencers and marketers that influencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.”

Putting aside for now the question of how the FTC managed to select 90 influencers and marketers from thousands, what is meant by (1) “clearly and conspicuously”, (2) “relationships” and (3) “promoting or endorsing”?

Let us examine them here (in reverse order).

“promoting or endorsing”

According to the FTC, an endorsement means “any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.”

In other words, any reference to your company, your goods or your services, by anyone other than your company and through their social media account, is an endorsement. Note that even a neutral reference would still be an endorsement, according to the FTC. This is likely because the FTC recognizes that consumers could nonetheless be persuaded even by an influencer making a neutral reference to your company’s goods or services.


A relationship is any “material connection” between your company and its endorser that could “materially affect the weight or credibility of the endorsement”. This essentially means that any connection that might reasonably be perceived by a consumer to affect the impartiality of an influencer is a “relationship” that should be disclosed – even if the influencer was sincerely not influenced by the relationship.

Either monetary or in-kind compensation is sufficient to form a relationship that must be disclosed. This includes your provision to the influencer of free samples of your goods or services.

“clearly and conspicuously” 

In the event your company does indeed have a relationship with an influencer who is promoting or endorsing your goods or services through his or her social media account(s), then your FTC liability can only be reduced by requiring the influencer to clearly and conspicuously disclose that relationship.

What your company instructs the influencer as to how to disclose the relationship depends on a variety of factors and your legal adviser’s good judgment. However, here are four points that will help guide you to a clear and conspicuous disclosure:

  1. #Ad” or “#Sponsored” must be referenced clearly and frequently. Cryptic abbreviations (e.g. “#Sp”) or ambiguous alternatives (e.g. “#Promotion”) must be avoided.
  2. Disclosures must not be buried within a multitude of other hashtags.
  3. Disclosures must be made repeatedly if your influencer is engaged in a dialogue over social media. As the exchange continues over social media, your influencer must regularly make the disclosure as new participants join and prior disclosures get buried.
  4. Disclosures should not require any additional clicking.  For example, your influencer’s followers should not have to click on “more” in order to reveal the disclosure.

Think early, clearly and often when it comes to disclosures on social media.

Fabio R. Silva, J.D. Stanford Law
FRSilva Law
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2017 Fabio R. Silva. All Rights Reserved.


10 steps to your first retail lease

So you are ready to open your first physical store.  You have chosen the right space, in a great location, and just the right size.  It can be incredibly exciting, until you receive a 30-page document from the landlord’s attorney, written in small print and heavily peppered with legal terminology.

Your initial instinct may be to place it in a corner of your desk and to ignore it.  This approach is not recommended.

Whether you choose to seek the assistance of legal counsel or not, there are things you can do to get yourself closer to a signing date, lower your risk, keep your stress level in check and perhaps decrease your dependence on external legal.

Here are 10 steps to keep in mind.

  1. Keep notes of all the points you have negotiated with the prospective landlord. These notes will be helpful as you get to the end of what could be lengthy negotiations.
  2. When negotiations have ended, ask the landlord for a “letter of intent” or “term sheet.” This is a non-binding document that memorializes the parties’ negotiated terms (e.g. rent, start date, free rent period, security deposit, term, broker fees, store opening date, etc.). Confirm that the letter of intent accurately reflects the tentative deal as you have come to understand it.  A reasonably detailed letter of intent will be helpful to have on hand once you receive the first draft of the lease.
  3. The prospective landlord may ask you to sign the letter of intent, to acknowledge receipt. This is fine, but you should ask that a paragraph indicating its non-binding nature first be added to the document. In some jurisdictions a letter of intent could be legally binding, so you want to make sure it is not.
  4. When you receive the first draft of the lease from the prospective landlord, compare it to the letter of intent. Make sure that the lease accurately reflects all the terms you negotiated. If you find any discrepancies, simply point them out.  They could be honest errors, so avoid making any accusations.  Remember, you want the space and no good could come from accusing your prospective landlord of dishonesty.
  5. Some paragraphs are entirely legal creatures (e.g. indemnification, subordination and condemnation), and you may feel uncomfortable reviewing and approving those provisions. This is where a real estate attorney, specializing in retail leasing, may be of assistance. Provide your attorney with the letter of intent and indicate what, if anything, is still not reflected accurately in the draft lease.
  6. Provide your attorney with as much background as possible in your initial meeting. An hour spent here will a go a long way toward keeping legal costs down and getting to a final version of the lease sooner. Avoid simply dumping documents on your attorney, because he or she will charge you for time spent trying to figure out the context of all these documents.
  7. Provide a copy of the draft lease to your insurance broker. The draft lease likely has insurance obligations and your prospective landlord may require that you produce proof of insurance once the lease is signed. Your broker may wish to modify some of the language, in order to reconcile any discrepancies between what the prospective landlord is requiring and what you can truthfully provide under your policy.  If you have chosen to hire counsel to assist you, provide your attorney with the contact information of your insurance broker.
  8. Work closely with your contractor, because the draft lease will likely have obligations that would affect how your contractor performs any work on the premises. Confirm that your contractor is capable of complying with these proposed requirements.  If there is a conflict, make an attempt to modify the language.  Your prospective landlord may agree.  Otherwise, there may be a compromise that is workable for both sides.  If you have chosen to hire counsel to assist you, provide your attorney with the contact information of your contractor.
  9. When you have received and approved the final version of the lease, initial all pages (including exhibits) and sign where indicated on the signature page. Do not forget to keep an original and mutually-executed version of the lease for your records. You have no idea how often I have come across situations where a client has signed a lease or a contract and failed to secure a fully-executed copy for his or her records.  Don’t consider the deal done until you have received a fully-executed signed original!
  10. File away the fully-executed original and include all your notes, including a copy of the letter of intent. I would also suggest that before filing these documents away, have them scanned and archive the digital copies.

Now focus on getting that store built out in time for your grand opening!

Fabio R. Silva
Disclaimer:  The above is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

©2016 Fabio R. Silva. All Rights Reserved.