Compensation
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Who pays the tenant rep commissions? Typically these commissions are paid by the landlord, not you.
Because the landlords only benefit is when a tenant is in their building, they are willing to cover the tenant broker’s fees as an encouragement for the broker to bring them potential tenants.
Landlords account for these expenses in their budgets, which ultimately is reflected in the rental rate. Landlords are used to paying both a tenant rep and their own broker in most deals.
Usually the landlord plans to pay a total of 6% commission, with 4% going to the tenant rep, and the other 2% going to the landlord’s representative.
In essence, the landlord rewards the tenant rep broker for helping the building get a new tenant. But don’t worry, a tenant rep broker still works for you and has a fiduciary duty to represent your needs in everything they do.
SYNERGY PRO TIP The Direct Deal Myth Sometimes the landlord broker will go to the tenant and try to negotiate their lease on a direct basis without a tenant rep broker.
Some tenants think this might be a good idea because it could allow them to receive a better rate from the landlord since they don’t have to pay a tenant rep fee. But in reality, a landlord is typically contractually obligated to pay their landlord broker a higher fee in the event that there is no tenant rep broker. So the savings a tenant thinks they might be getting by not using a tenant rep actually is going to the landlord rep.
Additionally, without the leverage that a tenant rep broker helps you bring to negotiations, you are likely to end up with far less favorable deal terms when you negotiate directly with the landlord.
Exceptions to This Sometimes, if the landlord feels as though the tenant rep broker has pushed them to their limit in regards to concessions, with below market rates, above market TI, etc., the landlord will refuse to pay the tenant rep’s brokerage fee.
In these rare occasions, it will become the tenants responsibility to cover their broker’s fees.
It is important to note, however, that when this situation arises, the savings that the broker has achieved for the tenant typically far exceed the 4% that they will pay in brokerage fees.
Because the landlords only benefit is when a tenant is in their building, they are willing to cover the tenant broker’s fees as an encouragement for the broker to bring them potential tenants.
Landlords account for these expenses in their budgets, which ultimately is reflected in the rental rate. Landlords are used to paying both a tenant rep and their own broker in most deals.
Usually the landlord plans to pay a total of 6% commission, with 4% going to the tenant rep, and the other 2% going to the landlord’s representative.
In essence, the landlord rewards the tenant rep broker for helping the building get a new tenant. But don’t worry, a tenant rep broker still works for you and has a fiduciary duty to represent your needs in everything they do.
SYNERGY PRO TIP The Direct Deal Myth Sometimes the landlord broker will go to the tenant and try to negotiate their lease on a direct basis without a tenant rep broker.
Some tenants think this might be a good idea because it could allow them to receive a better rate from the landlord since they don’t have to pay a tenant rep fee. But in reality, a landlord is typically contractually obligated to pay their landlord broker a higher fee in the event that there is no tenant rep broker. So the savings a tenant thinks they might be getting by not using a tenant rep actually is going to the landlord rep.
Additionally, without the leverage that a tenant rep broker helps you bring to negotiations, you are likely to end up with far less favorable deal terms when you negotiate directly with the landlord.
Exceptions to This Sometimes, if the landlord feels as though the tenant rep broker has pushed them to their limit in regards to concessions, with below market rates, above market TI, etc., the landlord will refuse to pay the tenant rep’s brokerage fee.
In these rare occasions, it will become the tenants responsibility to cover their broker’s fees.
It is important to note, however, that when this situation arises, the savings that the broker has achieved for the tenant typically far exceed the 4% that they will pay in brokerage fees.