Handling Problems With Your Commercial Real Estate Broker
If you’re careful when choosing a broker and spell out your agreement in a contract, you’ll reduce the chances of disputes later—but there’s no guarantee that all will be smooth sailing. The secret, of course, is spotting problems (and dealing with them) early. This section lists some common signs of trouble and possible solutions—the most extreme being to fire your broker.
Signs of Trouble With Your Broker
Take action if you encounter any of the following difficulties with your broker:
- Your questions about important issues (such as environmental hazards near the property or anticipated tax increases) are addressed poorly—or not at all.
- Your broker steers you toward certain properties (such as those listed with the broker’s office or that promise a higher commission) and away from others that may be more suitable.
- Your broker is over-anxious to close the deal and earn the commission, and seems to minimize or gloss over problems with a space or a deal, or fails to disclose key information
- Your broker may not share important information about you—such as your need to move immediately or your key negotiating points—with the landlord or the landlord’s broker.
Start by talking directly with your broker. A face-to-face airing of your grievances may be all you need to get things back on the right track. Sometimes, however, depending on the nature of the problem, you need to consider more drastic action, such as complaining to the broker’s boss, if there is one; filing a grievance with the local real estate board—or even with the state real estate licensing authorities (find yours on your state’s home page, available at www.firstgov.gov ); or agreeing with the broker to arbitrate or mediate your dispute (the local real estate board may have a procedure in place to handle disagreements).
Firing Your Broker
If communications have totally stalled or broken down, or your best efforts to improve your broker’s performance yield no results, it may be time to end the relationship. Depending on the situation, your broker (or his or her boss) may voluntarily agree to terminate your contract. If not, you’ll want to make sure that you have legal grounds for firing the broker. These include:
- Breach of contract. Your written contract should state what your broker’s duties are. For example, your contract may say that the broker will show you at least four appropriate spaces within 45 days. If the broker is a slacker and shows you only one space, that’s a breach of contract and you probably have the legal right to end the contract.
- Breach of fiduciary duty. Even if your contract doesn’t specifically say so, you have a right to your broker’s undivided loyalty. For example, your broker can’t disclose to the landlord or other brokers that you’re under extreme pressure to move into new space within 60 days and are prepared to pay top dollar to meet that deadline. Leaking this information without your permission can, of course, undermine your bargaining position—and it’s a serious breach of your broker’s fiduciary duty. This usually would give you the legal right to fire the broker.
When to Seek Legal Advice
Consult with an experienced real estate lawyer before you terminate your contract with your broker. Firing a broker when you don’t have a valid legal reason to do so can have serious consequences. For example, if you dismiss your broker improperly but go on to sign a lease on your own or with another broker, you may be liable for the first broker’s commission or you may owe other fees under your contract. A precipitous or unwise decision could come back to haunt you in the form of legal hassles and commission expenses.
This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman.