THAT’S RIGHT, YOU'VE READ IT RIGHT!!!!

I have found that most tenants don’t seem to understand or believe this concept. The tenant’s mindset seems to be, “one way or another, I’m going to be paying the commission.”

Let me explain how it works:

Most building owners understand that outside brokers deliver a high percentage of their lease transactions. The percentage might be very low on some of the more desirable locations, but even these buildings budget to pay competitive brokerage fees. On transactions not involving an outside broker, typically the building owner pays this commission to itself, the tenant’s cost of doing business should never be affected.

Beware of a building owner or leasing agent who refuses to work with your broker. One who prefers to deal directly with the less experienced prospect might see it as an opportunity to take advantage of your inexperience.

The only exception to this scenario may occur in a renewal or expansion situation. Depending on market conditions, most building owners feel, unless otherwise stated in their original leasing agreement with your broker, the reason you are renewing or expanding is a result of good service on their part, they should therefore not have to pay a brokerage commission.

Your broker’s job is to find you the right space at the best price. They earn a commission when deemed to be “the procuring cause of a completed transaction.” This occurs either by introducing the prospective tenant to the property (usually by taking the prospect to the property) or by playing an instrumental role throughout the transaction (such as advising and negotiating the deal).

The broker is motivated by the compensation he or she will receive upon the successful completion of the transaction. By law, it’s in the broker’s best interest to act in your best interest. As their client, your responsibility is to protect their claim to the commission. Therefore it’s vital that you work with only one broker. If you’re not happy with your broker’s performance, fire him or her and hire another broker. Avoid multiple brokers it only creates confusion, inefficiency and disinterest.

Hire a broker first, before you start making phone calls or visiting properties. A prospective tenant should determine whether or not to use the services of a broker, during the initial office search planning stage.

Once you’ve decided to employ a broker, it is absolutely necessary to interview several and select the one that best represents your interests. All to often, prospective tenants become impatient and consults a broker after visiting or calling buildings that attract them. Remember a broker’s income is based on commissions. Once the tenant visits a property or calls for information about the property, or consults more than one broker, your broker’s effectiveness and interest level has been drastically reduced. Visiting or requesting a proposal from a leasing agent or landlord will inadvertently register the prospect with the property as unrepresented by a broker. It’s unlikely that your broker will be paid a commission if you finalize a lease deal with this property.

A broker can only be effective when broker and tenant work as a team. Avoid your impulse to get started early. Hire your broker and let him or her earn their commission.

Jack Saltman is a commercial real estate broker with over 25 years of commercial leasing experience. He is an author, a consultant, a columnist and most importantly a teacher. Through his books, pamphlets, presentations, articles and seminars, Jack will share with and teach you his time proven, winning commercial leasing strategies.

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