Roles for Commercial Real Estate Brokers
Since commercial real estate brokers can function in different ways, it pays to know exactly what role a broker is playing in a landlord-tenant transaction. Here are some guidelines:
The generic term for a licensed intermediary who is working to get a landlord and a tenant to the point of signing a lease.
A broker who’s under contract with a landlord to find a tenant to fill a vacancy. The listing broker’s sole legal obligation is to the landlord. A listing broker who finds a tenant and gets a lease signed is paid a commission by the landlord—usually 3% or so of the rent over the life of the lease.
A broker who’s not under contract with a landlord but produces a tenant who eventually signs a lease. Usually the listing broker and the nonlisting broker split the commission. Unless other arrangements are made, the nonlisting broker is an agent of the landlord and—like the listing broker—isn’t obligated to look out for the tenant’s best interests.
A broker who agrees to represent only the tenant, the best option for a tenant who wants a broker’s full attention and undivided loyalty. If the space you end up leasing was listed with a landlord’s broker, normally the landlord pays one commission, which is shared by the landlord’s broker and the tenant’s broker. But if you lease property that hasn’t been listed, the landlord may not be willing to pay a commission to your broker. In that event, you must pay the broker. It’s best to address the issue of payment in advance in a written contract between you and your broker, as described in "Signing a Contract With a Commercial Real Estate Broker".
A neutral broker who tries to work for both the landlord and the tenant in the same transaction. The broker’s main duties tend to be mechanical—making sure that the lease details are worked out smoothly. Being fair to both sides can be a challenge. Because of the potential for conflict, some states don’t allow brokers to be dual agents.
A broker who’s a member of the National Association of Realtors. The word "Realtor" has been trademarked by the Association. Brokers do not have to be Realtors.
This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman.