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Last month, in Part One of this article, I discussed three major approaches to enhancing law firm profitability: expanding your client base; assertively managing billing, receivables and payables; and unbundling operating costs from bills for fees. Previously, in the August 2003 edition of this newsletter, I described a fourth major profitability approach: management of alternative billing strategies. This month's article concludes my overview of profitability improvement methods by summarizing 10 more techniques.

Uncertainty over who has to pay income tax on a lawyer's fee has long vexed employment litigation. But U.S. District Senior Judge Peter C. Dorsey has concluded that both client and lawyer must fork over income tax on the attorney's fee component of an award or settlement.

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Large firms have long had well-defined methods for transferring ownership interests in a practice via "mergers," "retirements," "breakups," etc. Attorneys in larger firms have also always had mechanisms in place that provided them and their heirs with funding for the value of their individual interests in the firm. By contrast, the outright "sale" of a law practice from one attorney to another was prohibited for decades. In 1991, however, the ABA dropped its opposition. California had already permitted such sales since 1989, and more states have now followed suit; so the mechanisms for selling a practice have been developing, albeit slowly. These changes are economically vital for small-firm and sole practitioners. Many of these attorneys tend to conclude their law practice without any transfer of ownership, by just closing their office doors one day and never returning. By doing so, an attorney forgoes "cashing in" on a valuable asset that has taken many years to build. That no longer has to happen. Like their counterparts in large firms, sole and small-firm practitioners ' and their heirs ' can now reap the rewards of years of effort. This levels the economic playing field for retirement and estate planning.

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In many instances a prospective sublandlord requires the consent of its master landlord in order to enter into a sublease. Virtually all well-crafted subleases are expressly contingent upon the receipt by the parties of a written consent by the master landlord to the sublease.

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Often in leases, particularly retail leases, the tenant seeks to protect the accessibility and visibility of the area immediately in front of its store location. For that purpose, landlords and tenants create language that prevents the landlord from placing any retail operation, structure or obstruction in front of the tenant's store within a certain number of feet or a designated area in the common area (often referred to as a "Restricted Area"). However, very often due to the vagueness of the language included in this type of a provision, as well as due to the limited nature of remedies available in this type of a provision, the tenant does not receive the type of accessibility and visibility protection that it thought it had negotiated. As a result, tenants should consider the following factors when negotiating accessibility and visibility protection provisions in their retail leases: (i) include a picture or site plan designating the "Restricted Area"; (ii) identify any specific remedies attributable solely to this provision; and (iii) limit competing uses for stores in the Restricted Area, if the existing retail tenants in the Restricted Area ever relocate from their existing locations or vacate the retail facility.

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Not surprisingly, most of the time we spend negotiating leases is devoted to discussions of significant, fairly predictable aspects of the landlord/tenant relationship: the fundamental business terms of the deal, details of business terms that were not fully settled before the lawyers became involved, and a variety of legal issues from assignment to zoning. As we all know, these substantive negotiations can sometimes consume more billable hours than our clients would prefer and (if we are fortunate) there are always other deals waiting in line demanding our attention. If we focus only on the major points, though, we may miss some meaningful issues and potential traps, for both the principals and their counsel, lurking in the mundane, "boilerplate" provisions of our leases. This article will explore several such provisions, not necessarily in order of importance. Although some specific suggestions are made and some sample provisions are included, the primary intent of this discussion is to provide a checklist of easily overlooked items to be examined.

You negotiated a settlement for your landlord client with a tenant that had not paid rent for a number of months, and, as part of the settlement, you recently received all the defaulted payments. Shortly thereafter, however, the tenant commenced bankruptcy proceedings. Moreover, accompanying the notice of commencement of bankruptcy was a summons and complaint against your client in which the debtor/tenant seeks the recovery of every settlement payment made, claiming they were preferential transfers.