By Liad Hadar, Director at Hadar Incorporated, Specialist Property Law Firm
This article first appeared in Asset Magazine’s August 2023 edition

In the realm of legal action, two concepts often intertwine but must be clearly distinguished – Prospects of Success and Prospects of Recovery. Both are essential to landlords, yet they differ in fundamental ways.

Prospects of Success relate to the desired legal outcome, which for our purposes as Property Lawyers is predominantly a judgment against a defaulting tenant for arrears owed. Prospects of Recovery focus on the actual ability to recover the arrears owed after the legal success.

From personal experience, in order to manage client’s expectations, it is critical for an attorney to explain to clients their Prospects of Success and, as importantly, their Prospects of Recovery. I strongly believe that a strategic discussion is necessary before an educated and calculated decision can be made by a client. Should the prospects be low in either, to proceed unabated without first discussing this with a client is professionally reckless and possibly fuelled by selfish reasons.

These strategic discussions and considerations speak directly to our Firm’s maxim- Add Value Not Hours™.

This article sheds light on both aspects, offering insights into how they function and what best practices are to ensure that landlords make give due consideration before taking legal action.

Prospects of Success: The Legal Pathway

The Prospects of Success refer to the likelihood of achieving the correct legal outcome, such as obtaining judgments against tenants for arrear rentals, ejectment, and damages for the balance of the lease (if applicable). This aspect typically falls within the professional discretion and ability of lawyers. Our clients heavily rely on us for this, and we owe them the highest duty of care in this regard.

Key Factors to Consider

Robust Legal Framework: A lawyer or law firm with a comprehensive and expert understanding of the law, processes and procedures, ensuring a high probability of obtaining favourable judgments.

Evidence and Documentation: A meticulously prepared case, with all relevant evidence and documentation, paving the way for legal success.

Expertise and Experience: Engaging expert lawyers with a solid track record and specialized knowledge, who understand the strength (or weaknesses) of the merits of a client’s claim, substantially increases the chances of a successful legal outcome.

Prospects of Recovery: The Financial Reality

The Prospects of Recovery, on the other hand, mean the actual likelihood of recovering rent arrears or other awarded amounts resulting from legal success. This aspect is often outside the direct control of lawyers and depends largely on the financial strength of the tenant, the tenant’s surety / sureties and the assets owned by the respective parties but must still be considered by both landlord and attorney.

Key Factors to Consider

Financial Strength of the Tenant: A tenant’s financial solvency and overall fiscal health directly impact the likelihood of debt recovery.

Surety / Sureties: The financial soundness of a surety plays a vital role in guaranteeing the fulfilment of the tenant’s obligations and actual recovery from obtained judgments.

Assets for Execution: The existence of tangible movable and immovable assets owned by the tenant or surety / sureties facilitates successful execution on judgments.

Bolstering the Prospects

Given the distinct nature of success and recovery, different strategies can be employed to bolster both prospects.

For Prospects of Success, engaging with expert lawyers with proven track records ensures that legal procedures are handled efficiently and appropriately. A glowing reference from other clients and relying on a firm that offers strategic input as opposed to mindless generic advice are both extremely significant for these purposes.

For Prospects of Recovery, conducting due diligences on potential tenants by scrutinizing their financial background, creditworthiness, and business reputation not only minimizes the risk of default but more importantly provides insight of the prospects of effectively recovering when legal success is obtained.

The same can be applied for evaluating a surety / sureties, by investigating their financial health and obtaining a list of assets, ensuring that there is something to execute upon if needed.

Conclusion

The Prospects of Success and Prospects of Recovery are intertwined yet distinct. The former represents the likelihood of obtaining the correct legal judgment, relying on the expertise and diligence of lawyers. The latter deals with the tangible recovery of awarded amounts, dependent much more on the financial strength and assets of the tenant or surety / sureties.

Understanding this dichotomy is essential for landlords and lawyers alike. By carefully selecting potential tenants, being aware of and monitoring the financial health of all involved parties, it is possible to enhance the Prospects of Recovery. By doing so, landlords can make informed decisions on taking legal action, considering the likelihood not only of obtaining legal success but also recovering the arrears, therefore best protecting their property asset values.