You’re reading the paper at your kitchen table when your 14-year-old son, Bobby, plops himself next to you and says excitedly, “Dad, I’ve decided to run for Class President but I need your help.” Beaming with pride you pat him on the back and enthusiastically offer to throw yourself completely into his campaign. You know that Bobby will benefit from your experience, after all you ran for office several times in high school and college. He’ll do better with your knowledge of how campaigns should be run. Everything is falling neatly into place when the back door flies open and Bobby’s twin brother, Sam, enters the room with an ear to ear grin, proudly announcing that he is going to run for Class President. Suddenly, things have become a bit more complicated on the campaign trail.
Bobby and Sam now have a major problem and so do you. They were both hoping to have their dad completely pledge his allegiance to their cause and fight to the death to achieve their important objectives. Now you are faced with a number of unappealing options: (1) commit to Bobby’s campaign and alienate Sam; (2) commit to Sam’s campaign and alienate Bobby; (3) convince either Bobby or Sam to drop out of the race this time around or at least settle for a run at Vice President; or (4) convince mom to get involved and support one of the twins while you support the other.
You realize that scenarios 1, 2 and 3 all require you to abandon the goals of one of your sons. So you decide to get your wife involved so you can each commit to a different kid. What could possibly go wrong with that scenario?
To appease both Bobby and Sam you and your wife promise to keep your conversations with your respective candidates confidential and not to share any information between spouses. Now that you’ve given each candidate a committed advocate and have pledged confidentiality, there couldn’t possibly be a problem with the representation could there? Of course not.
You’ll have no problem posting campaign signs in the school cafeteria touting Bobby as the better candidate or prepping him as to how to attack Sam’s weaknesses in the upcoming debate. You can dig right in and zealously advocate for Bobby without guilt or hesitation because, after all, mom has Sam’s back. The conflict immediately goes away and has no impact on your personal actions because you’ve created the Chinese Wall and made sure Sam has an advocate.
Why is it so easy for people to see the splitting of loyalties in the above scenario is bound to end badly, yet many of the same people fail to see the problem of the divided loyalties in a business context?
When you think about it, commercial brokerage is a lot like presidential elections. One party to the negotiation (the tenant) wants to pay the lowest rent possible. The other party (the landlord) wants to receive the highest rent possible. You can’t make both parties happy because, like with Bobby and Sam, the objective of one is completely inconsistent with that of the other. Thus, if you advocate for one, you necessarily must advocate against the other. Creating artificial confidentiality and pawning off one’s fiduciary obligations to a cohort may sound good in theory, but it doesn’t change the client’s expectations or needs. In addition, it doesn’t change the fact that you are waking up every day working directly against one client’s interests.
How is this conflict typically resolved? In our example, the most likely outcome would be option (4): the parents would most likely convince both children to drop out (neither party gets what they want) or convince one child to drop out or run for a different office thereby favoring one child over the other. That’s what ultimately happens in brokerage as well when a conflict arises. Since the broker can’t structure a deal that achieves both the highest and lowest rent at the same time, he’ll either convince both clients to split the baby in half, thereby resulting in a bad deal for both, or convince one party that a bad deal isn’t really that bad after all.
Conflicts of interest are very messy and usually end badly for most of the parties involved. While some real estate companies continue to brush aside the realities of these contradictory allegiances, the reality still remains: you cannot represent two different people who you truly care about in the same endeavor when they have completely contradictory goals and objectives. Common sense tells us that any attempt to serve two masters will end badly. Parents know it, lawyers know it, Bobby and Sam certainly know it. Unfortunately for tenants, when it comes to their real estate broker, the possibility of collecting two commission checks on the same transaction often takes priority over common sense.
For more information contact Glenn Blumenfeld