Dilapidations: negotiation advice
24 June 2019
Negotiating dilapidations depends as much on people skills as it does on surveying expertise. What can you do to ensure you succeed?
To be a good building surveyor, you need to know how buildings work; but to be a great building surveyor, you need to know how people work too.
This advice is particularly relevant to dilapidations negotiations. Surveyors are great at dealing with the technical aspects, but not so great when it comes to the negotiation stage. This is mainly because surveyors are well trained in those technical aspects, and also reasonably well trained in the legal ones, but sadly lacking when it comes to training in negotiation.
Many surveyors also believe they are negotiating when they are in fact simply haggling. Haggling is making an offer at different price points until a deal is made, and typically concerns itself with price alone. Negotiation is about getting something of equal or higher value in exchange for any concession you may make.
A good starting point is to understand that most negotiations go through 5 stages
It is vital that you enhance your capability and confidence as a negotiator. A key principle in this is to focus as much on people as on the technical aspects. A good starting point is to understand that most negotiations go through 5 stages, as follows.
First, far too many dilapidations negotiators fail to plan or prepare correctly. This is vital: without effective planning and preparation you can only react to what happens in the negotiation rather than controlling it.
It is important to consider each item on the schedule without losing sight of the overall settlement, and the implications of section 18 valuations, supersession arguments, betterment and interpretations of repair standards also need to be taken into account. It is also vital to keep up to date with relevant case law and legislation.
You should also plan for the kind of person you will be facing, as your approach to negotiating with an experienced fellow surveyor will be different from that when dealing with an uninformed tenant, and different again when facing a ruthless business owner who may be uninterested in RICS guidance and pre-action protocols.
Second, discussion: depending on the subject and the people involved, this stage can be relatively calm or it can descend into an argument. Whatever the nature of the conversation, the purpose of this stage is to review the issues fully and exchange information. It is vital that every possible effort is made to understand the other party’s point of view, and to be sure that they understand yours.
Third, signalling and proposing: each negotiation in which you are involved will typically result in an agreement that falls somewhere between meeting all your needs and meeting all those of the other party. As a negotiator, therefore, you need to be on the lookout for signs of willingness from the other party to consider movement towards your ideal outcome.
Such signals are usually followed by proposals – actions, approaches or processes that one party suggests to the other. Proposals advance negotiations and without them not a lot happens, so discussions go round in circles and increase the possibility of deadlock.
Fourth, bargaining: this stage is characterised by the 2 parties trading with each other so each can achieve their objectives. The key to effective bargaining is giving to get, and a basic rule of negotiation is never to make a concession without getting something of equal or greater value in return. In dilapidations negotiations, the return could come some time after the concession was made as you work your way through the schedule, so it is important you do not lose track and keep careful notes.
Some items offer less opportunity for negotiation but there will always be some negotiation on price. It is therefore best to avoid getting stuck if you cannot find common ground on a given item. Simply suggest that you park the topic and move on to the next. Return to the trickier items towards the end of the negotiation when a sense of progress has been established.
Fifth, closing: this is when agreement to proceed is reached. Make sure you summarise clearly the agreed deal to ensure you have a common understanding.
The most important remains the first stage: up to 90% of your success as a negotiator depends on the quality of the planning and preparation you do in advance. Some of the vital elements you should include in the planning and preparation are as follows.
- Objectives: what specifically do you want to achieve, and how will you measure your success? Ensure that you write your objectives down as this will make them more concrete; unclear objectives will usually lead to poor results. It is also vital to consider the objectives the other party may have, and then confirm these during the discussion stage.
- Negotiation parameters: because most agreements will fall somewhere between the ideal outcome of both parties, it is important to consider the range in which a settlement is possible. Define your own or your client’s ideal outcome, then a realistic outcome based on your knowledge to date and finally your musts. Next, consider the likely range of the other party. If you cannot secure your musts, you must walk away and discuss alternative actions with your client, such as a part 36 offer. Part 36 of the Civil Procedure Rules allows either party to make a settlement offer; if this is not accepted and the opposing party fails to beat the offer at trial, then the court can impose costs and penalties. As a major incentive to settle, this can be a powerful negotiating tool.
- Negotiable areas: what elements will the negotiation centre on? List those that are important to you and those that you anticipate are important to the other party. During the negotiation you will attempt to get some of what you want by trading something they want in return. Work out what each concession will cost you so you can make sure you always get something of equal or greater value in return. It is useful to look at elements such as tenant alterations that can be legitimately claimed for, but which are less important to you or your client.
Mike Hazeldine is a director at GNA Surveyors. Simon Hazeldine is an international speaker, author and performance consultant
- Related competencies include: Conflict avoidance, management and dispute resolution procedures, Landlord and tenant
- This feature is taken from the RICS Built Environment Journal (June/July 2019)
- Related categories: Dilapidations