Just when is a deal not a deal…?
I heard this story from a friend of mine the other week; there are some lessons to be learned!
So, my pal is a developer and is building some houses on what is essentially a square site. Two sides of the square can be accessed from the road in a neighbouring housing estate and the other two are beside a field owned by another developer. There is a huge pile of muck to shift before the actual building project; this phase is known in the trade – and not unreasonably - as a "muck-shift"! As there will be 80 -100 lorries coming in and out each day for 6 weeks, it was considered more convenient to access the site over the field, so an approach was made to the developer to discuss the terms under which he would allow access. This is a fairly standard arrangement and the deal typically is that the field would be returned to the owner in its original condition. Developer makes a bit of money, where otherwise he wouldn’t; homeowners in the adjoining estate are less inconvenienced; builder does not need to spend money cleaning the streets and getting them back to a usable state at the end of the project. Win-win.
After a bit of haggling (it could never have been described as a negotiation), where my pal made an initial offer of £19.5k, a figure of £26.5k was agreed. Hands were shaken and a contract was forwarded to the other developer, who returned it unsigned, saying that a “gentlemen’s agreement” had been reached. A week before the lorries were due to roll, he got back in touch asking for more money. So much for the “gentlemen’s agreement”. The builders, resourceful chaps that they are, had another look at the problem and came up with a perfectly safe, do-able alternative access plan that, though not perfect from the home owners’ perspective, would involve access to the site, without using the developer’s field at all.
My pal went back to the owner of the field. He thanked him for helping to identify a cheaper solution but politely declined to pay more than the £26.5k that had been agreed as part of the original “gentlemen’s agreement”. In fact, armed with his builder’s alternative solution, my pal went further. “Given that you reneged on the original agreement of £26.5k, we now consider that deal as off the table. We are reverting to our original offer of £19.5k – “and”, he added, “that is our final position.”
The developer held out, unaware that there was an alternative solution. My pal implemented the alternative and the developer missed out on £26.5k.
Moral of the tale?
- Be careful with whom you shake hands. It is a sad fact of life perhaps, but deals are better made in writing and contractually – even, it seems, in Scotland, whose legal system has long allowed for such a contract.
- Be aware of your negotiating limit.
- Don’t get greedy.
- And if someone fights fire with fire and comes out with guns blazing, it might be desperation – or they might just know something you don’t…