Real estate agents and agencies for decades have offered up their venerable tenant representation services by describing both their value as no conflict of interest and their summary of helpful services in the transaction. Yet just as the commercial real estate industry was thought to have turned the corner into 21st century expert professional representation skill, several current developments have proved that the more things change - the more things stay the same, and the more companies are exposed to harm and foul. This is particularly disappointing to this professional who has espoused (yelled about) the requirement to ratchet up professional and thorough representation; however having said that, this particularly reinforces the advice to seek out only those professionals who have achieved perfect skill in representing tenants.
In the Commercial section of the Realtor Magazine (May 2009) - The Business Tool for Real Estate Professionals - an article has been written for commercial agents providing professional advice on how to position agents in the present recession economy (2009). Principle among the advice is guiding agents to the prospect of landlords providing major rent concessions to entice tenants and offering side benefits such as increased real estate commissions, giving away free "SMART" cars to agents and to only focus on tenants who will do well in down economic times. Real estate companies now routinely offer much increased real estate commission percentages to real estate brokers to entice them to steer tenants to their buildings (versus other buildings who may be offering lower real estate fees.
In short, these situations should signal the mature commercial company that real estate agents, in addition to feeding into their own greed for higher fees and gifts, are being advised by professional organizations and reinforced by greedy landlords to ignore tenant's objective needs to, instead, fatten their own wallets.
The issue of real estate agents representing a tenant with no conflict of interest becomes dangerously limited in the face of this damaging, competitive landscape. When considering to show a tenant a building where the fee to the tenant representative is 2.5% versus a building offering 6% as an inducement, temptation can be too great to not show the building with the lower fee - or at least be less caring in evaluating it objectively for the tenant. Throw in a free car, or a free trip to Colorado, or a free cruise and it can be impossible to ensure the tenant's interest is being professionally maintained under the full force of the fiduciary laws governing buyer's and tenant's agency. What evil lurks in the hearts of men? Increased fees, trips, cars, cruises, that's what lurks!
In tenant representation, it is essential to have a firm, clear and written agreement with a tenant representative which specifically enumerates the fee to the tenant's agent at a fixed number. In this manner, the tenant can rest assured that the tenant will be alerted to the disclosure of such offers to brokers; and notify the client that the agent has declined the special inducements and thus kept the transaction completely unaffected by self-interest or self-serving actions (or convenient acts of omission).
Along these lines, the fixed fee to the agent also allows the tenant to qualify those landlords who will not pay a reasonable fee to the representative. If a landlord is unwilling to pay the professional representative a fee, then they should be disqualified (they will surely be just as miserly with the tenant improvements, operating expenses, snow removal, janitorial, etc). If they truly want the tenant, they'll come to their senses.
And continuing on with the tenant's concern of just what services the tenant representative is providing, these same articles clearly illustrate that they define the professional by the skill they have in poring over which rent concession pic-nic basket; saying nothing about the tenant's needs assessment, workplace efficiency, long-term financial risks, architectural and interiors needs, evaluation of each building's technical data, operating expense evaluation, construction cost containment, project and construction management, lease negotiation skill, move management and mastery-level skill at process management. Office leasing is not about three months free rent, or even six or 12 months free rent. My golden retriever Woody can deliver that result to any tenant. Tenant Representation is not about concessions at all. If that alone was the criteria, every tenant would simply hire The Sapranos to represent them. Only the Tenant Rep who can provide the sophisticated degree of services specifically to manage the whole process should be considered. The tenant also does not need the conflict of interest (or lack of focus) from those firms which also represent landlords, property management, industrial, retail, land, investors, portfolio managers, developers and real estate investment trusts.
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