I'm Not Your Partner

 

Commentary:

Before I begin, I just want to let you know that this topic is directed towards the commercial leasing brokers. I'm giving the selling brokers with no interest in leasing a chance to click out before they go any further. However,  If you're curious about one of the many special issues leasing brokers face continue reading.   

In my post Observations I listed "Somehow the broker is magically transformed into the landlord's partner when the landlord asks what happens if the tenant stops paying the rent, as it relates to paying the broker's commission".

It amazes me how often I'm asked by the landlord; What happens if the tenant goes bad? We all have choices in life including on how we conduct business. As leasing professionals we have the choice to work with good tenants or crappy tenants.

Me, I choose to work with good tenants. I highly value my reputation and I don't want to be known in the market as the broker that only cares about "making a commission". The, I'm here to jam this tenant down your throat, now pay me mentality my sub-par competitors practice. The ones whom I affectionately refer to as "The Village Idiots".

Now on-the-other-hand, the landlord has made his choice to accept all of the problems, risks and benefits that are associated with owning income producing properties. This also includes the leasing risk. When the landlord starts suggesting that somehow my commission is tied in with the stability of the tenant, he's looking to lay some of that risk off onto me. 

This presents itself in a couple of ways. Occasionally, the landlord just blatantly says that he wants to be reimbursed for the un-amortized commission from the time the tenant defaults, but most of the time they choose to use the more subtle approach of wanting to pay my commission out over the lease term either monthly or annually, setting me up not to be paid should the tenant skip in the middle of the night.

By accepting these terms I've, in essence, become a partner in the downside with no upside benefits.

When I'm confronted by the landlord with this question, my answer is always; "I'm not your partner". And I'm blunt about it. I go on to say that you as the landlord have a choice to accept this tenant, or if you're not comfortable, don't go forward leasing them the space. No hard feelings. I understand.

But once you've accepted them as a tenant I've "provided a service" and as the owner of the property, the risk is yours. I also go on to say that I expect to be compensated in a timely manner for that service. At this point I usually hear some blah, blah, blah whining, crying and complaining about how some broker stuck him with a crappy tenant. I sit and listen patiently, but the truth is that it's not my problem. He's the one who chose to be a landlord.

If I'm not getting through I'll say something like; I'll tell you what, go to your lawyer, your architect and to your contractors and suppliers that will be involved in this transaction and constructing the space for the tenant, and get them all to agree to take their fees on a monthly basis too. Who, buy-the-way are receiving those fees directly brought about through my efforts.

The reply is usually; Uh, I can't do that. (No shit Sherlock! They'll all tell you to go F... yourself! So why then should I agree to it?).

Another response I use if things start getting testy is; Ok, but I want a percentage of the building's cash flow. A percentage of any tax deferred cash you pull out when you refinance, and a percentage of the gain should you sell the building. After all, you're inviting me to be your partner. Shouldn't I have a share of the benefits too? (with a smile) Oh, I almost forgot, I want to be a limited partner so I don't have the lay out any cash for repairs or improvements. (Hey, what's good for the goose and all of that.) Then I sit back and watch him pop his eyeballs back into their sockets and pick his jaw up off of the floor as the vein in his neck pulsates.

Believe me, if the conversation has deteriorated to this point the meeting has gone sideways anyway, and I'm just having some fun or maybe inflicting just a little sadistic torture.

I love this business.