To act as a real estate broker, a person needs to get a license. The requirements vary from state to state, but usually involve passing an exam, taking continuing education courses and adhering to strict rules issued by the state legislature or an administrative com-mission.
Real estate brokers often employ or contract with (and supervise) state-licensed salespeople. The requirements for becoming a salesperson are less rigorous than those for a broker. In this chapter, we use the term "broker" generically to cover both brokers and salespeople. The term "agent" is also widely used to cover both types of real estate professionals.
In a traditional commercial leasing situation, the landlord lists available space with a broker who then goes out looking for tenants. If a lease gets signed, the landlord pays the broker a commission-typically 3% or so of the rent paid over the life of the lease (excluding any extensions or renewals). The broker with whom the landlord lists the property is called the listing broker. If another broker (a non-listing broker) brings in a tenant and a lease gets signed, the two brokers usually split the commission.
Under this traditional way of doing business, the listing broker is the landlord's agent-someone whose primary duty is to look after the landlord's interests. This means that the broker is duty bound to work out a lease that's as favorable as possible to the landlord. You may find yourself working with a broker under these traditional rules if you respond to an ad for space or call a phone number on a sign in a building window. Similarly if you go to a broker's office and ask about available properties, you'll he operating under these rules unless you and the broker make other arrangements. Be aware that, legally speaking, even a non-listing broker is the landlord's agent unless you and that broker work out something different. Obviously, it's crucial for you to know right from the get-go if the broker you're dealing with is obligated to look out for your interests. Laws in most states require brokers to tell you who they're working for. Fortunately, these days you're not necessarily stuck with the traditional model in which the broker promotes only the land- lord's interests. More and more brokers are willing to align themselves with tenants.
Understandably, you may be uncomfortable dealing on your own with a landlord and the landlord's broker. It's a bit like being involved in a lawsuit where the other side, hut not you, is represented by a lawyer~ sometimes you can make out OK on your own, hut often not. To even things out, you can engage your own broker, who will represent your interests and only your interests.
The best kind of broker to hire is one who consistently works only for tenants. This professional is likely to have the instincts and loyalties that will serve you well and may he more aggressive and creative than brokers who work with both landlords and tenants. Unfortunately, it may take a while to locate such a broker-and if your business is located in a small community, you may find no one who fits this description. Sections C and D, below, explain the benefits of hiring your own and how to locate a suitable broker.
The next best thing to engaging a dedicated tenant's broker is to find a reputable broker who works for landlords or tenants. You'll have an easier time finding a broker like this to work for you. Such arrangements will work just fine when your broker is showing you properties represented by brokers in other offices; iii this case, you know that your broker's allegiance will be firmly on your side. However, the situation gets cloudy if your broker's own office has taken listings for spaces that you want to see. This puts your broker in an awkward position. She is duty-bound to find you the best space regardless of who has the listing, but is also committed to contribute to the success of her office. You may not feel 100% sure about where her 1oyalties lie, Suit, such a relationship can he workable. In Section F, we'll explain how to address this potential conflict in a written contract with your broker.
There may another way to handle the situation of your broker showing you space represented by one of her office colleagues, hut the solution is not a very satisfying one. The arrangement, allowed in some states, involves asking the broker to step away front his or her role ~s an advocate and instead assume a neutral stance. A broker who works like this is known as a dual agent. The broker's role is limited to attending to mechanical details and helping to make sure the transaction flows smoothly. For example, a dual agent may check on the zoning classification of the space or shuttle lease proposals back and forth between you and the landlord. A broker might work as a dual agent if:
The benefits of using a dual broker are limited. You won’t really get much, if anything, in the way of useful advice or practical guidance since the dual agent can't be your advocate! In a nutshell, you can be left high and dry when it comes to knowing whether the deal is advantageous or not. The only sure way to get the benefit of professional real estate services is to sign a contract with a broker who agrees to act solely in your behalf.
EXAMPLE: Dual Agent. Tenant Dolores and landlord Andy are using broker George of Tri-County Commercial to put together a lease deal between them. George will be a dual agent. George knows exactly how much Dolores is willing pay for rent and how desperate she is for good space. He also knows how much Andy is willing to accept as rent and how long a lease he'd be willing to grant. Yet, as a neutral agent, George can't use this information on behalf of either party. The best that George can do is to take Dolores's proposed terms to Andy and perhaps offer Dolores a list of qualified inspectors and contractors for her to consult regarding the condition of the property and the cost of improvements. Those benefits are minimal as far as Dolores is concerned. She's a novice in lease matters and really needs much more help to get a good deal. She wisely decides to hire a broker of her own. Meanwhile, Andy has decided to stay with George. If George is a broker with professional integrity, he will not share Dolores's secrets with Andy even though he no longer works for her.