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Full-service law firms generally survive economic shocks (including financial crises) better than most, due to the countercyclical nature of their many and varied practice areas.  When the economy is booming, the transactional “deal” teams do well – think M&A and commercial real estate deals and other investment-focussed practice areas.  When the economy is struggling, other practice areas step-up to deliver strong countercyclical revenue streams – think litigation and dispute resolution, regulatory investigations, restructuring, insolvency and related “advisory” practice areas.   

The pandemic has forced law firms to re-evaluate how they do business and to critically address the role that the office plays in their continued success.  The tired old stereotype needs updating - the one about lawyers burning the midnight oil in individual offices, meticulously poring over encyclopaedic reams of dense legal documentation.  Sure, lawyers still deal in huge amounts of complex legal documentation, but the lawyers of today are more collaborative and connected than ever before, often working across time zones and in large multi-discipline “project” or “deal” teams with colleagues, clients and counterparties dispersed around the globe. 

The ability for lawyers to communicate and collaborate efficiently and effectively has never been more crucial.  In response, law firms have adapted the way they use their office space, ramping up their meeting room and collaboration facilities, adding flexibility to their physical space (the ability to quickly and easily adapt room sizes and configurations to suit specific purposes) and improving audio-visual capability to meet the increasing demand for video-conferencing and remote meetings and presentations. 

Leasing activity amongst law firm occupiers is strong and there have been many high-profile deals consummated recently, generally involving firms moving into state- of-the-art new build or substantially refurbished spaces.  Some firms have made a conscious decision to stay-put, by recommitting to their existing premises, and instead implementing ambitious reconfiguration and modernisation works.  In both cases firms are seeking to improve the functionality of their office space, and to improve its amenity and desirability, to help attract their key people back into the office.  There is an intensifying “war for talent” amongst law firms, and the quality and useability of a firm’s physical space is an important factor in helping it to attract and retain the best and brightest legal talent. 

Here at JMW Solicitors we have doubled the size of our London office footprint over the past 24 months.  We have expanded in order not only to accommodate our rapidly expanding team, but we have also seized the moment to optimise our working environment for efficient and effective collaboration amongst our team and our clients.   

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THE LEASING HOT-TOPIC - ‘THE ENVIRONMENT & THE OFFICE’

JMW Solicitors advises its clients on office leasing, investment, development and funding deals. 

In each context, environmental issues - particularly those relating to the environmental performance of buildings and the changing regulatory framework - continue to be a hot topic.  With workforces now returning to the office, businesses are acutely aware that their people have renewed expectations around the environmental credentials and overall amenity of their place of work.

A challenge that comes up time and again on deals is M&E (mechanical and electrical services) obsolescence, particularly on second-hand stock, and often even on recently refurbished office assets.  FRI leases generally oblige a tenant to put and keep the demised premises in good repair and condition, and that obligation is usually expressed in the small print to extend to (potentially expensive) M&E in or serving the premises.  Depending on the drafting, that repair obligation often extends to replacing kit that has come to the end of its operational life.  A standard schedule of condition does not provide sufficient certainty in this circumstance, as it generally does not evidence the technical functionality of M&E kit, nor its useful remaining lifespan.  Occupiers are well-advised to carry out technical due diligence (engineer’s reports, and the like) in circumstances where they are concerned about potentially costly or inconvenient repair or replacement liabilities they might be taking on.  In some situations, it may be appropriate to apportion liability for certain kit in the drafting, or to incorporate as a condition of the deal documents that certain investigative or remedial works are carried out.   

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A related issue we see on the horizon stems from the environmental performance of office buildings and premises. The government has set out increasingly stringent minimum energy efficiency standards, which will come into force over the next few years.  A huge swathe of London office buildings will struggle to meet these new energy efficiency requirements unless major (think costly and disruptive) refurbishments are carried out.  Landlords may, naturally, be tempted to pass some of these costs on to occupiers via the service charge provisions of their leases.  Service charge caps, and bespoke exclusions to the list of permissible service charge expenses, are sometimes necessary.  On a longer lease, depending on the environmental credentials of a particular building, it may in some circumstances be appropriate to include specific drafting specifically apportioning liability for the cost of environmental upgrades as between landlord and occupier.

Ensuring that the environmental and sustainability objectives of both landlords and tenants are achieved will increasingly require careful investigation and legal provision, some which is already standard practice but other aspects of which will inevitably evolve over time in line with government mandate and with the increasingly stringent demands of the market.  2022 is the year in which we will finally see awareness of these issues translate into meaningful action.

To find out more www.jmw.co.uk.

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