Tenant Representation

Dec 22

12/22/2011 11:39 AM  RssIcon

Submitted by G. Bryant
New York law permits commercial real estate brokers to represent both the buyer and seller (or lessee and lessor) relative to the sale (or lease) of a property, without the requiring the broker to notify both parties to the transaction of the broker’s dual representation.  This is analogous to an attorney attempting to represent both parties to a contract negotiation without informing those parties, a clear violation of legal ethics.  As with any important contractual agreement, it is understandable as to why most parties would prefer that brokers working on their behalf are not conflicted by the competing interests of another party.

Tenant Representation is the term used to define the services provided  by a real estate broker representing the interests of a buyer/tenant in their search for a property to develop, own or occupy.  Real estate firms that specialize in Tenant Representation often establish an exclusive representation relationship with a prospective buyer/tenant, the details  of which, including how the “Tenant Rep” will be compensated.

How are Tenant Representatives compensated?
A Tenant Representative can be compensated in a variety of ways.  More often than not, Tenant Representatives agree to participate in the brokerage fee established by the owner/lessor to compensate brokers who secure buyer/tenants for the owner/lessor’s property.  If the property is “listed” with a real estate broker,  the Tenant Representative or "Tenant Rep" shares the leasing or sales commission with the owner/lessor’s listing agent. 

It is common practice for commercial real estate lenders to require owners to include leasing fees in their development budgets.  Designed to insure that commercial buildings are competitively marketed, these fees are paid to the listing agent or retained by the developer as an additional revenue source regardless of whether the buyer or tenant uses a real estate agent.

Why use a Tenant Representative?

An experienced, full-service Tenant Representation firm, becomes a member of the buyer/lessee’s team (which may include a space planner/architect, real estate attorney, move coordinator and other specialists as needed) and is often responsible for coordinating the activities and responsibilities of the team members. The “Tenant Rep” identifies the buyer/lessee’s objectives, provides market analysis, compares alternative options and negotiates final contract terms and conditions.  An experienced professional Tenant Representative can:
  • Save valuable time
  • Provide their client with the freedom to stay focused on the client’s core business activities with the comfort of knowing that the details are being attended to
  • Reduce capital outlays, and save money during the relocation
  • Reduce operating expenses
This is why it is in the buyer's (tenant's) best interest to retain a broker who specializes in Tenant Representation, a broker who:knows the specific market opportunities:
  • Can identify a suitable location based upon the client's parameters
  • Is able to negotiate the lease or purchase in the client's best interest, using his knowledge of the marketplace (including concessions, i.e., free rent, tenant improvement allowances, historical deals , moving allowances, capping building operating expenses, etc.)
  • Will act as the buyer/tenant’s real estate department, at no cost to the buyer/tenant

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