RE87C14: Commercial Tenant Brokerage

Approved July 3, 2014

1. DIFFERENCE BETWEEN COMMERCIAL AND RESIDENTIAL REPRESENTATION:   
   1. 2003-04 MAR Agency Law Task Force redrafts new Agency Law to include the role of a “Facilitator”
   2. Applies to real estate agents engaged in the purchase or sale of land with a building intended for use as:
      1. 1-4 Single Family Dwelling Unit (SFDU), Purchase or sale of land intended for 1-4 unit residential dwelling
      2. July 1, 2005: Massachusetts Board of Registration for Real Estate implements new agency law
      3. See and review former and new “State Mandatory Agency Disclosure Form”
   3. Required disclosure form of relationship to consumers of real estate at the first personal meeting. (See 2005 Massachusetts Mandatory Licensee-Consumer Relationship Disclosure)
   4. Commercial Real Estate operates under common law
2. ESTABLISHMENT OF AGENCY:  
   1. Express written or oral contract where agent and principal agree to terms.
   2. Implied agency by actions and/or words
   3. Compensation does not create an agency relationship.
3. TYPES OF LICENSEE/CONSUMER RELATIONSHIPS:
   1. Commercial Tenant Agency – Real estate agent represents tenant client exclusively or not exclusively in real estate transaction
   2. What is the definition of “Exclusive representation”? How does “exclusively” differ from “working with a commercial tenant”?
   3. Tenant/Corporate Representative’s duties to tenant/client include "OLD CAR".   
4. SERVICES OF A COMMERCIAL TENANT REPRESENTATIVE:
   1. Assist the Client to develop goals and specifications such as geographical, possibly demographics, job opportunities, new customer contracts or new hires, employee commute routes and house locations, customer base, future business plan and expansion, dimensional, functional, aesthetic and financial. Services may differ depending on the nature of the Client; i.e. office, industrial, retail, medical, lab, R&D, etc.
   2. Assist in developing the full team for this project including the client’s legal counsel, accountant, environmental firm, space planners, insurance agents, etc. Understanding how the lease affects the commercial tenant’s balance sheet if applicable. Perhaps review FASB 13, GAAP or IFRS accounting changes.
   3. Determine if a lease termination or extension can be reached
   4. Establish with the prospective tenant/client if alternative sites for lease may exist with or without purchase options.
   5. Review the Corporate client’s entrance and exit strategy with leasing, long-term business plans, customer base expansion, possible business contractions or relocation, possible additional location decisions, possible Merger & Acquisition issues, new product design or new start up business issues, etc.
   6. Conduct a property inventory survey for the Client. Direct and/or sublet options
   7. Review the inventory survey with the Client and short-list commercial buildings for tour.
   8. Coordinating a site tour with landlord commercial broker or landlord directly.
   9. Conduct final tour. Develop a customized acceptable commercial RFP format that advocates the client’s interests.
   10. Create a competitive process with prospective commercial landlords/sublandlords.
   11. Assist in analyzing commercial lease proposals submitted by landlords.
   12. Investigate any public economic tax benefits and environmental issues for the commercial end-user, state economic trade zone districts, tax incentives, 21E issues, Title V, etc.
   13. Develop financial lease analysis of lease proposals and operating expenses, physical configuration and layouts, expansion potential, parking and other physical characteristics of each building as it fits the commercial tenant’s needs.
   14. Assist with a letter of intent to lease.
   15. Contact the appropriate legal counsel for a commercial lease agreement.
   16. Reviewing the commercial lease agreement, offering recommendations and identifying pitfalls or advantages for the commercial tenant and negotiating business terms.
5. ENGAGING A COMMERCIAL BROKER BY A COMMERCIAL TENANT:
   1. Represents tenants (exclusively or not exclusively?) as a client
   2. Many brokers work with tenants without exclusive written contract
   3. Many issues on whose best interests the broker represents
   4. Tenant engages the services of a broker to work in its best interests
   5. Similar to being an “in-house” real estate manager but only being hired for a limited time on limited work
   6. Mandatory Licensee - Consumer Relationship Disclosure is not Tenant Agent Contract
6. COMMERCIAL TENANT AGENCY COMPENSATION:
   1. Commission based on rental rate value or square footage
      1. Paid by tenant directly via contract between broker and tenant
      2. Paid from transaction by listing broker via agreement between listing and landlord broker                                
      3. Paid directly by landlord, unrepresented or represented
   2. Flat Fee/Counseling Fee: (not a net commission fee)
   3. Fee for Service/Advisory or Counseling Fees
   4. Beware that without a valid, active Massachusetts license, commissions cannot be shared

1. References:
   “Tenant Representation in Real Estate” by William Feldman, SIOR
   “Agency Relationships in Real Estate”, 2^nd ed., by John Reilly
   “Mastering Office Leasing”, 2^nd Edition, Society of Industrial and Office Realtors