Every trip abroad with the client was an experience in itself. He was the kind of client who loves the good life and does not spare himself, the team or the service providers the small and large pleasures. From the car in which we got around, through the indulgent meals at chef restaurants, to massages at the end of a busy working weekend before returning to Israel. When we completed the deal to purchase the plot he sent my office a hamper loaded with goodies, and when the building permit for the first phase of the project was received we celebrated at a club (in the VIP area, of course).
And then Covid arrived. We were stuck in Israel. Work on the site began to proceed at a snail's pace. Sales stopped. The local contractor began demanding what he was owed, and the client kept putting him off from month to month. The local bank refused to release financing to continue the project. Through my local partner we tried to obtain financing from other banks. The answer was always the same - times are hard, sales are not enough, and so on. We started negotiating with private funds and various financing bodies. We were left empty-handed. At one of my meetings at our office with another client, I asked whether he could finance the project, at least with bridge financing, instead of extracting profits he had in that country. The moment I spotted an opening of hope I set up a three-way meeting for us.
The chemistry between the two was immediate, and agreements were reached over lunch.
The agreement was drafted by me, but on the lender/investor's side another lawyer was brought into the picture. The negotiation was not easy and/or simple. It was agreed that the lender would act as an investor entitled to receive units in the project in return for the funds he would invest, with allocation keys set according to the amount of funds that would need to be transferred to the company. He was also given decision-making powers on certain matters concerning the development of the project, the finishes of the units, sale prices and more. To secure the funds he would transfer to the company he insisted, and my client agreed, on placing a lien on the land in his favor.
Soon the chemistry evaporated, and the two men's different characters began to leave their mark on the conduct of the project. The lender/investor clashed with the developer and confronted him over almost every decision he made concerning the project. The number of conversations I held with the parties in trying to mediate between them, smooth things over and allow the project to continue was indescribable. As time went by the relationship and the trust between the two kept deteriorating.
Just before everything blew up I summoned the two to my office. I asked them to be authentic and to speak candidly. To set out, each of them, what bothers him and what motivates him in the actions he takes within their cooperation. At first they did not understand what I wanted from them. I explained that if they were not authentic and did not try to take off the masks and settle the matter here in the room, both of them would lose, as would the project. It was hard at first. But slowly they began to open up and speak openly, to set out their concerns, talk about their fears, describe past experiences in which they had been hurt. As time passed and they managed to communicate, I saw how they were beginning to understand one another. We managed to bring the positions closer. They managed to understand what each of them was willing to compromise on and what, for the other, was a “red line”. After about 5 hours we went out to a joint lunch, at the end of which they shook hands and went back to working together with an understanding of each other's needs, concerns and fears.
You are all familiar with placing a lien on the land in favor of the bank or another financing party, but how many of you have thought of, or foreseen, or, heaven forbid, experienced the moment when the lending party enforces the lien and, with a wave of the hand, a project you worked on for months or years slips out of your hands?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית