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Some of your tenants may have an option to cancel the lease early by paying a cancellation fee. Under many standard brokerage agreements, when and if the tenant exercises that option, you must pay the broker commission on the full cancellation fee you receive from the tenant. That’s a raw deal for you, and you should negotiate for fairer terms.
The owner of commercial property comprised of two buildings with an adjoining lobby hires a brokerage firm to find a tenant for the space. The broker lines up a tenant. The lease runs five years and requires the “Owner” to pay the broker’s commission for the initial lease and any renewal term. The tenant signs the lease and the owner pays the broker a commission on the initial lease term.
In addition to commissions on actual leases closed, many landlords agree to pay their real estate brokers a monthly retainer. This is an effective way to ensure the availability of brokers you know and trust.
But retainer fee arrangements can also make it harder to break up when and if things go sour. Like marriages, every broker-client relationship is different. The one thing that’s certain is that you can’t rely on minor infractions that a broker may commit as justification to terminate a retainer fee.
Brokers line up a company that may be willing to make an offer on a commercial building owned by a previous client. You make this work and I’ll pay you a commission, the owner promises.
The owner of commercial property comprised of two buildings with an adjoining lobby hires a brokerage firm to find a tenant for the space. The broker lines up a tenant. The lease runs five years and requires the “Owner” to pay the broker’s commission for the initial lease and any renewal term. The tenant signs the lease and the owner pays the broker a commission on the initial lease term.
A shopping center tenant hires a broker to find somebody to sublease 5,100 square feet of the space it’s leasing. The listing agreement names the broker as the tenant’s exclusive agent and provides for a 6 percent commission in the event:
The space is “subleased”; or
The tenant’s underlying lease with the shopping center is cancelled.
In their eagerness to get the lease signed, brokers may be inclined to make statements about what the document says (or doesn’t say) to allay the concerns of one of the parties. So, what happens if the landlord or tenant takes the broker at its word and signs the lease, only to discover that the broker’s assurances were wrong? Does the party that relied on the assurances have a valid claim for fraud against the broker? A recent case from California sheds some light on this question.
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