Cost Considerations: The Final Advantages of Renting vs. Owning Office Space for New Lawyers

When starting a legal practice, new lawyers face a pivotal decision: should they rent or buy office space? Given the unique demands and uncertain growth stages of a fledgling law firm, understanding the cost implications of both options is critical. Here’s a breakdown of the financial factors that make renting an attractive choice for new legal professionals:

1. Lower Initial Investment

Buying office space requires significant upfront costs, including a down payment, loan fees, and potentially high closing costs. For most new lawyers, who are managing startup expenses and potentially still paying off student loans, this large capital requirement can be a major barrier. Renting, on the other hand, usually only involves a security deposit and the first month’s rent, preserving cash flow for critical early-stage investments, like technology, staff, and marketing.

2. Predictable Monthly Expenses

Ownership might sound appealing for asset-building, but it often comes with fluctuating expenses: property taxes, maintenance, and unexpected repairs. In contrast, leasing provides predictable monthly costs, allowing for easier budgeting. Many lease agreements bundle utilities, maintenance, and janitorial services, meaning new lawyers can focus on their practice without sudden, unexpected expenses.

3. Flexibility to Scale

New law firms often need time to understand their growth trajectory and target market. Renting allows lawyers to choose a space that fits their current needs with the flexibility to scale up or down as the business changes. Leasing short-term or in flexible coworking spaces lets firms relocate or expand as needed, a level of adaptability that buying can’t offer without major cost implications.

4. Less Administrative Burden

Owning property comes with a long list of responsibilities—from building upkeep to managing legal compliance issues—which can quickly drain time and resources. Renting transfers much of this burden to the landlord, allowing lawyers to focus on building their client base. When starting a practice, minimizing distractions and administrative demands is key, making renting an efficient option.

5. Access to Prime Locations at Lower Costs

Renting gives new lawyers access to desirable, high-visibility locations that may otherwise be prohibitively expensive to buy in. A well-located office can boost brand perception and client convenience, enhancing a new firm’s ability to attract clients and build its reputation without the heavy investment required to buy in these areas.

Final Thoughts

For new lawyers, renting provides financial flexibility, manageable costs, and operational advantages that are hard to match with ownership. While buying can be a smart long-term goal, renting can be the most effective path to a successful start in the legal field.

Starting your firm on solid financial footing is essential, and renting office space can offer the stability and flexibility needed to grow and thrive.

Ross-Clair v Canada (Attorney General): Contractors Beware of Charging for Extras

Ross-Clair, a division of R.O.M. Contractors Inc. v Canada (Attorney General),2016 ONCA 205 [Ross-Clair] is the Ontario Court of Appeal’s (“ONCA”) latest decision affecting the commercial construction industry.

Commercial construction contracts typically include not only arbitration clauses, but also detailed provisions on how to deal with disputes over additional costs incurred during the project “extras.” The contract in Ross-Clair contained a provision appointing the Project Engineer (“PJ”) to adjudicate all claims for extras made by Ross-Clair, a division of R.O.M. Contractors (the “Contractor”) and to make a binding decision on whether to approve such extra costs. While the PJ’s decision could be challenged in arbitration, the Contractor was required under the provision to provide sufficient detail to support its claim.

After providing notice of a claim for $1,437,976.00 to its client, in this case Public Works Canada (“PWC”), a division of the Federal Government of Canada, the Contractor thought it was complying with the meaning of the provision. PWC however, took the position that the information was insufficient and that the PJ could not render a decision as a result. The Contractor brought an application to the Superior Court seeking an Order that the PJ make a determination on the Contractor’s entitlement to the extras.

After the applications judge granted the Order, PWC appealed the decision on the basis that the Contractor failed to provide sufficient details of the extras in accordance with the contract and thus should be precluded from claiming anything at all. In seeking only to interpret and apply the provisions of the agreement, the ONCA agreed with PWC. In doing so, it rendered a decision that reached too far into the contractual relations between the parties and interfered with the Contractor’s fundamental rights under the agreement. Determining the standard of review to be ‘correctness,’ the ONCA proceeded in its analysis to re-weigh some of the facts, without indicating whether the applications judge made a palpable and overriding error. Overall, the decision appears to be impractical and creates uncertainty as to how much information will satisfy the terms of such provisions in commercial construction contracts.

Issues and Reasoning

The applications judge carefully considered the provision requiring the Contractor to provide sufficient detail on the facts and circumstances of a claim for extras. The applications judge found that the agreement required the Contractor to provide more than mere notice of its claim to PWC, but the requirement did not extend so far as to require the Contractor to prove its claim for extras. The judge found on the facts that the Contractor provided information that was sufficient for the PJ to make a determination of the Contractor’s entitlement and ordered the PJ to make such a determination. This was a reasonable decision that respects the agreement between the parties and further enables them to proceed with the process they agreed to in the contract. If the PJ still had concerns at this point over the insufficiency of the information provided by the Contractor, this could have been dealt with by weight, meaning any missing information could be held to detract from the Contractor’s claim.

Yet the ONCA treated the informational requirement as a threshold issue, meaning that if the information was deemed insufficient by PWC, the Contractor’s right to the claim would be extinguished altogether. Interestingly, the ONCA disagreed with the lower court over the standard for assessing the sufficiency of the information provided. In fact, it held that the Contractor, in the context of such a provision, was basically required to prove its claim to the other side. After a significant amount of correspondence was exchanged between PWC and the Contractor over the sufficiency of the information in support of its claim, the latter did in fact produce a detailed report titled “Analysis of Delays and Additional Costs” on May 28th, 2013, which is one year and three months after the project was certified to be complete. Implying that the sufficiency of the information in this report may have met the standard required for the Contractor to prove its claim, the ONCA then found that this report was too late.

Uncertainty for Future Parties

A related provision to the sufficiency requirement was that a claim for extras had to be submitted no later than 30 days after the project was certified to be complete. Thus, the ONCA’s position on the report being late is understandable. However, the above notice provision is separate from the sufficiency requirement. Logically, the two are not dependent on each other. Moreover, nowhere does the agreement state that a failure to meet the sufficiency requirement constitutes a failure to meet the requirement to submit one’s claim. However, the ONCA held that these provisions must be read in the entire context of the agreement as a whole, purportedly justifying the conclusion that failure to provide sufficient information within 30 days after completion is a failure to provide notice of the claim at all. It is unclear in the ONCA’s decision how that conclusion was specifically reached.

The ONCA could have reasonably reached an alternative conclusion without conflicting with the agreement as a whole. While one specific purpose of the agreement was to create certainty by imposing time limits—hence the 30 day deadline to bring a claim for extras—the general purpose was to provide a multi-stage dispute resolution mechanism upon which the parties could rely. In this case, the immediate dispute was not over the extras but over the quantity and quality of information provided in the claim for extras. Extensive correspondence between the parties shows that they disagreed over this point. This is much different than failing to start a claim at all within the 30 days. Why then does disagreeing over the information provided result in one party being stripped of its rights under the contract because they couldn’t see eye-to-eye with the other party on how much information to provide? Such an interpretation of the contract is not only inconsistent with the Contractors’ right to a fair process, it puts the other party, PWC, into a supra-advantageous position where it can continue to deny the adequacy of the information provided in the context of a dispute if a contractor is unable to prove its claim. In other words, it puts PWC into a position of power and its enables it to act self-servingly. It is unclear whether the contract as a whole intended such an unbalanced result.

Conclusion

In deciding as it did, the ONCA rendered a decision that reached too far into the contractual relations between the parties and interfered with the Contractor’s fundamental rights under the agreement. The applications judge made a reasonable decision in ordering that a disputed claim be adjudicated according to the process agreed to by the parties themselves. Overall, the decision appears to be impractical and creates uncertainty as to how much information will satisfy the terms of such provisions in commercial construction contracts.

BY DEZSO FARKAS · MARCH 20, 2016

PUBLISHED AT thecourt.ca