In a week that finally saw the announcement of the most lucrative and highly-anticipated contest in boxing history – a $160M showdown between Floyd Mayweather Jnr and Manny Pacquaio, we (as property lawyers and sports fans) ask the question: ‘Are there any similarities between negotiating an international super fight and a simple contract requiring a landlord to carry out some building works for a tenant?’
Background to the negotiations
For those with an interest in sport, you may already be familiar with the history to this contest, but for those who are not, here’s what you need to know. These two individuals are the most successful boxers of their generation, they hold world titles in the same weight division, but (bizarrely) they have never managed to agree on terms to fight each other. This is despite years of ‘on-off’ negotiations.
At this point, you’re probably thinking there’s no comparison here. How can negotiations over a property contract be similar in any way to the gruelling discussions between Mayweather and Pacquaio over the past 5 years? Admittedly, this is a bit far-fetched, but let’s consider some of the reasons why these talks have stalled for so many years:
This is typically the biggest factor in any negotiation. In terms of the boxers, it’s quite simple – they each want to earn as much as they possibly can. Their respective TV networks will also weigh in with their financial demands. Whether the parties agree on a 50:50 split, or 60:40 in favour of one, depends very much on their negotiating position.
In the context of our property contract, a similar, and equally important, decision needs to be made as to how the costs will be split between landlord and tenant. How much will it cost? How many quotes are required? Who will cover the excess if it turns out to be more expensive? Again, it all depends on each party’s bargaining position. If the parties can’t reach an agreement about the cash, negotiations will end, abruptly!
The timing of a fight is crucial. One of the fighters may be ‘at his peak’ whilst another may be in decline. One of the fighters may be in a good run of form, whilst the other may be ring-rusty and out of shape. Rumour has it that this fight was originally scheduled to take place as early as 2010, but unfortunately negotiations broke down.
In the property context, timing is also important. Where a landlord has agreed to carry out work for a tenant, there may only be a small window of time to complete those works in order to reap the maximum benefit. Thereafter, the opportunity may be lost. For instance, completing work on a new shop-front the day after Christmas, is not likely to be of much use to a retail tenant! The parties need to set strict time limits and consider penalties and contingencies in the event that the timescales are not adhered to.
One of the most widely-publicised and controversial reasons for the fall-out between Mayweather and Pacquaio has been the drug-testing fiasco. Mayweather insisted on an ‘Olympic’ style drug testing programme, which allows for random blood testing on any day, at any time, with no limitations whatsoever. Pacquaio, by contrast, wanted certain parameters to be applied for instance, no blood tests in the 7 days leading up to the fight.
In the context of our property contract, whilst there is no need to consider blood testing (you would hope!), it is fundamental for the tenant to carry out detailed inspections of the landlord’s works. Parties often disagree as to the mechanism and timing in this respect. How and when will these inspections take place, and to what effect? This is typically one of the more difficult aspects to negotiate and parties regularly fall out over this, particularly with more complex works.
Whether it’s blood testing or building works – it seems nobody likes to have someone else digging around in their affairs!
4. The aftermath
In the property industry, after the works are carried out, a well-advised tenant will have the benefit of contractors’ warranties to fall back on if things go wrong. This is something that ought to be discussed and planned from the outset.
For the boxers, however, it is strictly a one-off, and this is where the analogy ends. Perhaps this fear of losing is the single biggest reason why this fight hasn’t happened until now. Whilst their advisors may talk about a ‘rematch clause’ within the contract, the harsh fact is, if something goes horribly wrong on 2 May 2015, neither Floyd Mayweather Jnr or Manny Pacquaio will have any way of rectifying it – there is no ‘defects liability period’ here.
The world awaits…