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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