What is a Tenant Representation Agreement?
Tenant Representation is when a real estate Agent represents the interests of a Tenant in their search for a commercial property for lease. Along with the agency disclosure form, most companies use an exclusive representation letter to show Agents and Landlords of properties that, indeed, the Agent represents the Tenant, how the Tenant’s Agent will be compensated and the duration of the Agency contract.
Why should I care?
As Agents, we are all aware of the law requiring real estate professionals to disclose to Tenants and Landlords, who the real estate broker and their Agent is representing in a transaction. We also make you familiar with the agency disclosure forms which will have a place to check, indicating whether an Agent of a broker is representing the interests of the Landlord, the Tenant, or both. Both parties sign this form, and this makes it clear to all parties, who is representing who in a transaction.
To this end you will be presented with your options, a contract for services, and asked to choose the type of representation your situation requires, as well as to sign the contract to begin the process.
If this is not your experience, it should be as it is mandated by our Code of Ethics for all Realtors.
What if I don’t sign?
The Code of Ethics clearly states that loyalty ultimately rests with the client and that a broker or salesperson must protect and promote the client’s best interests. However, the Code also requires that a broker or salesperson deal fairly, honestly and with integrity and provide conscientious service to all clients and customers.
You can decide to be a customer, rather than a client, but should be aware that the obligations of the brokerage will differ and we will not owe you a fiduciary duty. Customer status also means that we may help you prepare the paperwork for an offer, but you are on your own when gathering market intelligence, context of value compared to other properties and deciding upon your offer strategy.
Should you decide to become our Client, we will assist you to prepare and negotiate an offer seeking the most advantageous terms on your behalf (including price), provide referrals to other professionals, and help you do your due diligence on a specific property. As our Client we shall maintain our fiduciary duty that requires that we always act in your best interest.
Multiple representation means that a brokerage is representing both the Landlord and Tenant in a transaction. There are no standard terms of services under Multiple Representation so you need to refer to your representation agreement before any offer is submitted. Multiple representation must be consented to in writing.
When such a situation arises, ask questions, and make sure you are comfortable with how it may affect the services provided to you.
At Squarefoot, we often work in Multiple Representation. We explain what you should tell us and what you should keep to yourself which allows the contract negotiations to work out the finer points of each party’s interests.
How are Tenant Representatives Compensated?
It is stated clearly in the Tenant Representative Agreement letter that the Landlords of the property compensate the Agent in the manner consistent with that market. The Tenant Representative or “Tenant Rep” broker splits the leasing or sales commission with the owner’s Listing Agent. A flat fee or hourly consulting rate can also be a form of compensation. A one size fits all solution does not exist, nor should it, and there is no such thing as a standard fee in commercial real estate – it is what both parties feel is fair.
The fee is paid to the Listing Agent (who represents the best interest of the Landlord, NOT the Tenant) regardless of whether the Tenant uses their own Tenant Rep Agent. The Tenant generally does not pay a direct fee in a transaction. There are exceptions to the compensation and who pays, and therefore it is important to establish a firm understanding and communicate this understanding in writing as soon as possible.
While there is no “standard” holdover clause, generally, a holdover clause means that if a property, that we have introduced to you, is bought or sold or leased within “X” days of the Tenant Representation Agreement expiry, and you have contracted directly with the Landlord without our assistance, commission may still be payable to our firm. The general principle is that we have introduced you to the property, provided you with market information, analysis, and context, sufficient to make an educated and informed decision and therefore we should be compensated for our work.
Why Use a Tenant Representative?
Tenant Reps become an integral part of the Client’s relocation/location team with the others; a space planner/architect, real estate lawyer and other specialists as needed, e.g., phone, furniture, computers, attorneys, accountants, contractors, movers, telephones, and cabling, etc.
As the Tenant Representative, we lead the process. We first analyze your situation, your short- and long-term goals, and we listen to your concerns. As Tenant Reps we provide market analysis and guide you through the process, along with the various team members, to accomplish the goal whether it be a lease renewal, relocation, or build-to-suit.
We consider it a privilege to assist companies in getting from point A to point B. A strong level of trust and relationship is formed — as well as many great memories! At Squarefoot, we often receive new assignments and reciprocal referrals as a result of a job well done. Find out what our clients are saying about us.
It is in the Tenant’s best interest to retain a Broker who specializes in Tenant Representation, specifically:
- One who knows the specific market conditions inside and out.
- One who can locate a suitable location based upon the client’s parameters.
- One who understands the language that should and SHOULD NOT be in a lease contract.
- One who understands the multiple cost exposures written into the language of a lease contract.
When you do engage with a Tenant Representative, you can be assured of saving valuable time and money and getting the peace of mind that comes with it. In essence, as your Tenant Representative, we become an advocate for you, and a “right arm” to the decision maker.
Before you sign
As brokers we want to provide you with the best service we can. To make the most of this relationship, it’s important to clarify your needs and expectations. To avoid misunderstandings later on, it’s important not to make any assumptions. Take the time to ask what we expect from you and what your obligations are to the process.
Discuss all of the services that will be provided. Take the time to clarify the fees and costs related to these services and make sure the written agreement is clear.
Whether it be office, retail or industrial space that you require, Squarefoot can assist you in finding the best commercial space for lease under the most favorable leasing terms. Let us start today by compiling a survey of commercial property for lease that best suits your requirements.
- Identify commercial property for lease.
- Negotiate commercial lease terms.
- Provide full leasing services to ensure a smooth transaction.
Contact us at 705-735-2246 for details!