Mr. Landlord: When You Convince All of Your Other Service Providers to Reimburse You…Call Me!

If you’ve read any of my writings over the last few years, my positions are clear about the silliness that some die-hard commercial landlords still play when it comes to paying commissions that are due real estate brokers. Most landlords are very professional, appreciate the efforts put forth by commercial real estate brokers, and gratefully pay their compensation in-full and on time.  But, there still exists this small, decreasing group of curmudgeon-like landlords, who think it is their right to treat brokers unreasonably and unfairly. Their days, like their ability to realize great success, are numbered.

One of my all-time favorites is how many in this dying little group of commercial landlords think that real estate brokers are the guarantors of tenant creditworthiness, and that commissions paid to brokers should be conditioned and contingent on tenants performing their lease obligations. Some of these knuckleheads even think brokers should reimburse landlords when tenants default. The answer to this is really simple.  Commercial brokers:

* Are not credit analysts, and cannot provide you with any more details than you can obtain on your own

* Cannot guarantee tenant performance any more than they can guarantee landlord performance

* Deliver tenants to landlords, landlords to tenants, and negotiate transactions

* Have completed their job when the lease is executed

* Are protected by the laws of most states, which say that commissions on lease transactions are earned when the documents are executed, not over time or based on anyone’s performance

Despite the above facts, some landlords unfairly seek to shift their business risk to commercial real estate brokers, by claiming that the commissions due those brokers should either not be paid or reimbursed to the landlord, if a tenant defaults in the performance of its lease obligations.

To those landlords, I offer a simple response:

When you stop payments to, and / or receive reimbursements from ALL of your accountants, advisors, architects, attorneys, builders, cleaning companies, consultants, contractors, cost estimators, expeditors, delivery companies, drywall installers, electricians, elevator companies, engineers, environmental service providers, financial advisors, fire safety technicians, HVAC installers, insurance brokers, landscapers, lenders, masonry contractors, maintenance companies, management company, mortgage brokers, paving contractors, plumbers, roofers, security contractors, steel erectors, subcontractors, suppliers, tax advisors, trash haulers, truck drivers, utility companies, vendors, window suppliers, YOURSELF, and everyone else involved in your transactions in any way…AND, you advise me BEFORE we engage in any discussions that you will unfairly attempt to shift your business risk to me and to everyone else…only then, would I possibly consider doing business with you!

And, after you inform all of the above about your new payment policies, let me know how much longer you actually expect to be in business.  Frankly, when I explain your approach to my client…the tenant…there’s a very good chance they won’t want to do business with you, either!

So, let’s avoid this ridiculous conversation.  You bear what is rightfully your risk, the tenant will bear its risk, and we’ll bear ours, so we can all focus our energies on the real reason we’re engaged in a dialogue…creating a transaction between you and our tenant!

About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to finance and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com. Read about timely commercial real estate issues at RealStrat’s blog at www.CorporateAdvisor.wordpress.com. Follow RealStrat at http://www.Twitter.com/RealStrat.

LINKS:

RealStrat News
Biographies
Articles
Properties
What Our Clients Say

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

###

Advertisements

2 Responses to “Mr. Landlord: When You Convince All of Your Other Service Providers to Reimburse You…Call Me!”


  1. 1 Jeremy Cyrier, CCIM March 22, 2011 at 10:49 am

    Agreed. Wouldn’t this commission discussion be easier if we were paid by the party that we worked for?

  2. 2 Ralph Benzakein, SIOR, LEED AP March 23, 2011 at 12:41 pm

    Andy, As always, well said and entertaining. Hope you are well.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 42 other followers

Follow Me on Twitter



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.

%d bloggers like this: