Brokers Only Care About Commissions, Landlords Only Care About Rent….and, Other Silly Statements!

Every once in a while, one of those old-fashioned dying-breed landlords who thinks he can control every aspect of a lease transaction, will attempt to sway a tenant representative to minimize her efforts on behalf of the tenant she represents.   Such landlords don’t understand the foundation of the relationship between tenant and advisor, and often are challenged to see the positive results landlords can achieve as a result of that relationship. For those landlords who attempt to undermine relationships between commercial real estate professionals and their tenants, hitting a stone wall when their efforts prove unsuccessful, often catches landlords off-guard and causes high levels of frustration.

In other cases, some landlords, not those landlords who are considered the best or the most successful landlords, believe that they can use commissions due tenants’ real estate professionals as a means of financing lease transactions and / or mitigating risk.

When tenant representatives fight hard not just for their tenants, but also to ensure that they will be fairly compensated in an amount and manner they deem appropriate, in-full, and on time, some landlords become upset. More successful tenant representatives recognize that the commissions to which they’re entitled are not slush funds to help landlords finance lease transactions and mitigate their risk. As a result, when faced with a tenant representative who is immovable on this matter, some landlords will make that age-old claim: “Brokers only care about commission!”

For a landlord to suggest that a real estate professional is only interested in his commission is just like someone saying a landlord is only interested in his rent!  Hmmm?  Maybe we’ve got something there.  by way of comparison, ask any normal human being, one who receives a weekly salary, how upset they might be if that check didn’t arrive.  So, like anyone else, landlords care about receiving their rent (their source of income) and brokers care about receiving their commissions (their source of income).

Claims by landlords that brokers only care about commissions are pretty amazing, especially given the high number of lease pages that are typically devoted to landlord rights in the event tenants don’t pay their rent!  Moreover, if tenant representatives really only cared about commissions, they wouldn’t be in business very long, as their clients would figure that out pretty quickly.  Frankly, in my almost three decades as a real estate advisor, I’ve encountered some pretty funky people in the industry, but I have rarely come across those who only care about their rent or their commissions.

Do tenant representatives care about their commissions? You bet!  Do the best tenant representatives put the needs of their tenants before theirs? Of course! But, that doesn’t mean that tenant representatives shouldn’t be paid fairly when their job is done. Do landlords care about receiving their rent? Absolutely!  And, both parties should care.

All three parties in lease negotiations, tenants, brokers, and landlords, should fight hard for what they seek.  That’s what a negotiation is all about!  And, so long as tenant representatives fully represent the interests of their clients, so should they fight, with the knowledge of their clients, to protect their clients and to secure their own adequate compensation such that it will not be delayed or at risk!

Are some real estate brokers interested only in their commissions? Probably! Are some landlords only interested in rent without caring about their tenants? Probably! Should both of those groups be expunged from the commercial real estate industry? Absolutely!  As tenants demand more and more sophisticated services and objective representation, those landlords and brokers who only care about rent or commissions, respectively, will likely find it increasingly difficult to continue in that manner.

In any industry, there are always a few holdouts who do things they way they always have, and who insist that their opponents are the bad guys.  Eventually, those groups dwindle and the best emerge.  We’re seeing that today in commercial real estate.

What do you think?

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10 Responses to “Brokers Only Care About Commissions, Landlords Only Care About Rent….and, Other Silly Statements!”


  1. 1 robert evans April 21, 2010 at 1:22 pm

    tenant rep broker-who pays commission? you left this out?
    if owner/developer pays broker/tenant rep commission then your blog needs rewriting. If tenant pays broker – your blog ok.

  2. 3 Doug April 21, 2010 at 7:51 pm

    The tenant pays the broker’s commission through the rent structure. At the end of the day, when you really examine the ledger, the tenant almost always winds up paying through rent, no matter how you slice it.

    • 4 realstrat April 22, 2010 at 3:42 am

      Doug:

      Thanks for your thoughts. Like other costs of occupancy, commissions, tenant improvements, operating expenses, taxes, common area maintenance, and more, are typically built into the rent paid by tenants. As a result, most intelligent business people, and even some courts of law, recognize that those costs are actually paid by tenants…contrary to what some in our industry would have us believe.

      Keep checking in and sending us your ideas. Wishing you much success!

  3. 5 Frank Pipgras, SIOR, CCIM April 24, 2010 at 12:24 am

    Here is how owners can get totally upset with Brokerage commissions. I am a Tenant Rep Broker but also an investor. I just finished submitting a bid (Best and Final Offer) as an owner/investor for a GSA Lease. The Tenant is represented by a [large global real estate brokerage company] with a national rep deal with GSA. The [large global real estate brokerage company] has it written into their agreement with GSA that they get a five (5%) percent commission on the rent for 10 years plus the operating expenses plus the tenant improvements amortized over 10 years. The [large global real estate brokerage company] commission equals 11% of my total costs, plus I have to pay my broker (property is in a community not near my home) a 3% commission. My total commission numbers are over 14%. I am not upset at my broker, but [large global real estate brokerage company] is way over the hog line.

    • 6 realstrat April 25, 2010 at 7:20 am

      Wow! Certainly sounds like the large global real estate brokerage company is taking advantage of the American taxpayers, and that someone on the government side was asleep at the switch. Unfortunately, I’ve seen that before.

      I hope you can work it out to more reasonable terms. Please let us know. Good luck, and thanks for writing in. Please keep your ideas coming!

      Andy

    • 7 Frank April 26, 2010 at 11:58 am

      Having just completed 1 gsa deal directly and now working on 3 others with that same un-named natl co, they are being paid 6% on the first 5 years only. however they are paying back 40% to gsa. gsa in turn charges its ‘tenant’-user group between 8-12% for their services.

  4. 9 Marge April 24, 2010 at 2:59 pm

    My landlords are happy to pay renewal fees so they can maintain the tenant in their location. The overall expense to refit a space for a new tenant and suffer the vacancy out weighs the cost of the brokers fees. It is up to the broker to help the landlord understand the positive of having the tenant rep brokers help in the transaction. Often the Landlord is too emotional and the seperation helps keep the deal moving forward and everyone wins.


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THIS WORK IS DESIGNED TO PROVIDE PRACTICAL AND USEFUL INFORMATION ON THE SUBJECT MATTER COVERED AND REPRESENTS THE OPINION OF THE AUTHOR. HOWEVER, IT IS PROVIDED WITH THE UNDERSTANDING THAT THE AUTHOR IS NOT ENGAGED IN RENDERING LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE TO THE READER. IF LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL SHOULD BE SOUGHT. THE AUTHOR SPECIFICALLY AND EXPRESSLY DISCLAIMS ANY LIABILITY THAT MAY BE INCURRED AS A RESULT OF THE USE OR APPLICATION OF THE INFORMATION THAT IS CONTAINED IN THIS WORK.

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