Standing Up for Your Rights
If you have been a student of “What they forgot to teach you at Tenant School,” you probably figured it out by now. The money to pay for your being represented by your broker with regards to your exercising options is there. You just need to ask. Better yet, you need to DEMAND it, in a straightforward way, of course. It won't be easy unless you have a landlord who has some class and is respectable. Oops! I'd better continue real fast and you’d better keep reading.
Who pays and who doesn't
We have a philosophy in lease negotiations that carry over into the representation scenario. When we find an onerous clause in the lease, our first question is to either modify it or remove it. The respectable landlord will either comply or, at the least, look for compromise language. NEVER accept, "That will never happen!" as rationale. If it will never happen, then change it of take it out, otherwise assume it WILL happen.
So, our take on which landlords pay fees on options is categorized the same way. The classy landlord understands your contractual relationship (interesting I keep coming back to that contract….ARE YOU LISTENING???) and the value a broker brings to a transaction. If they try to cut out your broker, then it WILL happen. In this case the "IT" is ADVANTAGE LANDLORD.
Some Rules of Thumb
Even the best of landlords has some difficulty dealing with the "Commission to tenant's broker" problem. If a broker shows up six months before expiration and says, "I'm representing Cheatum, Robum & Lie and expect you, Mr. Landlord, to pay my fee," do you know what the landlord is going to say? Boy do they hate that!!!
However, if your broker has been working with you for some period of time, preferably he/she is the broker who put you in the space and, MOST PREFERABLY, they have been in contact with you and the Landlord throughout the lease, we have A NO BRAINER. If your broker is "new" on the scene but has been talking to the Landlord on your written authorization (again that "written agreement" thing shows up) regarding those options for a minimum of one year, no landlord should argue the point and again we have A NO BRAINER. At a minimum, they should pay your broker a percentage of the fee payable if this were a new transaction.
Stand up for your Rights and Other Strategies
How about the case where the broker who you engage wasn't your original broker (or you just called the name on the sign-BAD BAD BAD thinking)? How about the landlord who tries to push your broker out by going directly to you? UUUGLY!!!!
Let's start with the first example and a simple letter. Write to your landlord and tell them you are looking at all your options (opportunities) and that since you are not a real estate expert, you are working with a broker (NEVER use the word HIRE) and you anticipate he will compensate the broker just as if you were a new tenant. Too honest? Remember my rule about "It will never happen?" That should work with the classy landlord although you may have to have some face to face discussions with your landlord. DON'T BE AFRAID, IT'S ONLY YOUR MONEY!
An interesting scenario occurred recently where I was involved with a client whose option to renew was coming up. Throughout the Lease, the Landlord and I were very involved in various discussions on issues regarding the Tenant. The terms pursuant to the Option to Extend INCLUDING the economics were CLEARLY stated in the Lease. Despite all this, the (in-house) representative of the Landlord contacted my client directly (actually I always looked at it as BOTH our clients) and attempted to cut out my fee. Landlord's position…."This is OUR tenant!" Like I haven't heard that before. By the way, ownership recognized what was happening…we were compensated and the in-house person has moved on to a new industry. A good landlord realizes that even leasing, despite the different goals of the landlord and tenant, must be a business partnership based on trust and service.
|