The commission or fee earned by the real estate representative of the tenant is typically paid by the landlord.

To many this method of reimbursing the real estate representative may appear to be a conflict of interest. This fee, like all of the other costs associated with the transaction, is an integral part of the final rental rate sought by the landlord. These costs of the transaction are added to the final agreed upon rental rate to obtain the “Net Effective Rent” that the landlord is willing to accept.

It is important for the tenant to realize that the landlord has been typically responsible for paying the representing brokers on both sides of the transaction, as the case may be, based on the future rental income of the lease. Historically this has been the case because over the years, the landlord has been the fundamental source of money for improvements and most costs associated with the lease transaction.

The same is true for the purchase of real estate; however over the recent years due to “Buyer Broker” relationships, some purchasers are paying their broker’s fees directly and are putting this information in the contract for purchase, so that there is no misunderstanding.

However, in a lease transaction, attempting to save this commission by dealing directly with the landlord may prove to be “penny wise and pound foolish.” Why? Because in the overall cost of the transaction, this fee is only a tiny segment of the total expenses involved.

Having an advocate on your side that has a good working knowledge of the overall market and who can negotiate aggressively; will effectively, give you as the tenant, the ability to make an informed decision. As your exclusive representative, they will know how the transaction relates to the overall success and growth of your business.