What's a tenant representative? How do they get paid?
Most people are familiar with how residential and commercial real estate agents are paid. In both instances, the real estate agent is paid by the seller or landlord. Traditionally, a real estate agent works for commission and is offered a percentage of the total sales price, which both sides split.
But, do you know how your tenant representative is paid when it comes to your lease agreement? Who pays them? The tenant? The landlord?
When it comes to tenant representation, most real estate fees are not additive to your lease, but embedded. It is already figured into the lease structure for the landlord’s leasing agent and the tenant’s representative to be compensated. Much like a traditional sale, the landlord will pay a percentage of the total lease value to both sides of the lease transaction and if you don’t have representation, the landlord’s leasing agent often keeps the entire fee.
But how do they figure out the total lease value?
It’s relatively simple! If a tenant signs a lease for 3 years on a space that is 5,000 square feet at $20 per square foot, the total lease value would be $300,000.00.
The total lease value is then used to calculate the commission for both representatives, usually 6% total. This amount is then split between the landlord’s leasing agent and the tenant’s representative.
If hiring a tenant representative is free for you, why wouldn’t you use one?
As in any aspect of business, having a seasoned expert counsel you on the best steps to take, real estate is no different. Hiring a tenant representative means you will have someone to handle your real estate portfolio without you stepping away from your business. But it’s more than just that, as you need someone that exclusively works for you, and someone who has a deep understanding of the office and industrial markets in Florida. Hiring an exclusive tenant representative means you have a person whose sole purpose is to look out for your business’ best interests who negotiates terms that reflect the best possible outcome for you. If you go direct to the leasing agent, how do you know you’re getting the best deal? You just don’t. And, the same applies if the agent you use is also representing landlords in the market; their fiduciary responsibility is to that landlord, not you.