Common Fees from a Commercial Realty

Commercial realty (also known as “commercial real estate”) refers to any dealing with real property in a business context.  This can include leasing out office space, owning an apartment complex, selling real property along with and as part of the sale of a business, selling industrial or agricultural property, selling apartment complexes and/or rental houses for income-generating purposes, and working with the government.  Regardless of the type of commercial real estate transaction taking place, there are common fees associated with this type of real estate.

How the Commercial Realty Industry Works

Most real estate owners will hire real estate agents to lease their property on their behalf.  The agent attains a leasing agreement, which allows the agent to act on behalf of the owner as a fiduciary in leasing the property.  The agreement is based on performance, so the agent will earn a commission upon signing of the lease, usually one-half of it being paid upon execution of the lease and the other half paid when the tenant occupies the property.  Real estate agents are required to have a salesperson’s license (gained via an exam) in the state in which they operate.  They will “hang” their license at the office of a designated real estate broker.

Real estate brokers have additional licensing and educational requirements they must meet in order to have agents work for them.  Brokers are responsible for the agents who work under them.  When payment is received for a real estate transaction, the broker is paid, who then distributes the appropriate commission to the agent responsible for the lease.  This is known as a “split.”  “Splits” can vary from equal payments of 50/50 between agent and broker up to 90/10 in favor of the agent.

How Commercial Realty Commissions Work

It’s important to note that when you are shown a property, whichever agent shows you that property is legally entitled to a portion of the leasing commission as the “procuring” broker.  As a result, that agent is entitled to a commission.  If you hire a tenant representative later on regarding that same property and enter into a lease on that property, you could have a complex legal situation because the agent who originally showed you the property will want his/her commission, as will the tenant representative.  That is why it is advisable to decide whether you will hire a tenant representative before being shown any commercial real estate.

The relationship between how much you pay your tenant representative and how much work you should expect is commensurate.  Therefore, if you are paying a high fee for your tenant representative, you should be expecting much high-level service from that representative.

Commercial realty commissions are often based on a percentage of the rent due under the lease.  Therefore, the higher the monthly rent and the longer the term of the lease, the higher the commercial realty commission will be.

The quicker the lease is signed, the sooner that the agent will be paid.  This is important to keep in mind, as the agent will be very eager to finish the deal as quickly as possible, but you should be diligent in making sure that all terms of the deal are as you expect them to be and you don’t make any unfortunate compromises just to complete the deal faster.

Attaining Legal Help

Commercial realty transactions can be quite complex for the layperson or business owner.  An established and experienced real estate attorney will know the federal and state real estate laws that apply to your case, will present essential legal advice to ensure that you enter into a commercial realty transaction that benefits you, and will impartially analyze the details of your realty agreement to ensure they are what you really want and what you expect to receive from the agreement.