Risk management

Easy option?In October, Tom got a call from his long-standing client, Phil.'Remember that lease you did such a good job on?' Phil said.

'Well, business is going well - I'm thinking about buying the freehold.

I'd like you to look into it for me'.Tom remembered it well.

He dug out his old file and quickly found the lease and the separate option agreement.

He skimmed it quickly even though he had a clear recollection of what it said.

He had a good memory for this sort of thing.Then he dictated a letter to Phil:'...When you took on the lease, your agent negotiated the right for you to acquire the freehold on the first, second or third anniversary of the option agreement - the third anniversary expires in December and can be exercised up until then.

If you decide to go ahead, make sure you let me know so that I can take the necessary steps on your behalf...'Phil checked things out with his accountant and finally gave his solicitor the go ahead in November.

Despite may other pressing matters, Tom still exercised the option in good time in early December - or so he thought.

Any passing thoughts that he should have read the documentation in greater detail were brushed aside.

He had a good memory, didn't he?Just before Christmas he received the bombshell from the landlord's solicitors.

The option agreement had not been validly exercised.

An option notice should have been served not less than one month before the operative date.

Tom had overlooked this and had some explaining to do, both to his partners and to Phil.The landlord is still happy to sell, but for more money.

He wants an extra 60,000 and Phil knows that he is over a barrel.Trust the file, not your memory.l When the original matter is concluded, highlight on file and in your last letter to the client any information or deadline that is likely to be critical to any future instructions (such as planning deadlines, rent reviews or lease renewal dates).

Make it clear who is responsible for instigating further action.

l At the same time, if appropriate, record deadlines in your own diary and in the central back-up diary.l When receiving follow on instructions, do not rely on memory and a quick skim read.

Start with the above letter but then go on to study the file.

Check the wording of documents carefully.l Avoid vague expressions such as 'the necessary steps'.

Be specific.

State clearly what you will do and what the client has to do.

This will help prompt you to think clearly about critical actions.

It is also a good exercise in clear communication with your client.This column was prepared by the St.

Paul risk management team