Conflicts of Interest
Conflicts are abundant in many areas of life. If prior to any endeavor, you had an opportunity to eliminate a potential future conflict, wouldn’t you take the proper steps to ensure you did so?
Many brokers in commercial real estate have landlords and tenants as their clients. In this situation, how could a tenant be sure that their agent isn’t being influenced or incentivized by the potential opportunity to earn a commission on both the tenant and landlord side? This is called dual agency, and unfortunately, dual agency is not uncommon. Dual agency is an obvious conflict. And while one may know someone who is an agent at a brokerage firm that does both tenant and landlord representation, tenants and occupiers should consider working with an organization that is only going to receive a commission for the services they provide for them.
In true tenant representation, the landlord is not a friend, nor an adversary. They are just another business seeking to maximize their profit margin and there’s nothing wrong with that. However, the landlord’s broker is also seeking to maximize their profit margin. If the landlord’s broker can not only represent the landlord, but also the tenant, it’s in the landlord’s broker’s best interest to only offer options to their tenant clients that that broker is also listing for the landlord. It is impossible to have the landlord’s broker’s interests only aligned with one side of the transaction if there is dual agency.
What is important to understand is that tenants are paying for tenant representation services whether they receive them or not. In any landlord agency representation agreement, it will state that if a separate tenant procuring broker is involved, that tenant broker will receive a percentage of the commission. If a tenant procuring broker is not involved, what would’ve been the tenant broker’s share just gets paid to the landlord’s broker.
We have had many organizations approach us saying they weren’t aware that there were more spaces available than what brokerage company XYZ was showing them. Most people either aren’t aware, or don’t understand the agency relationship. In this case, the brokerage company was only showing them properties that they had under contract, significantly limiting space options.
Tenants should always take advantage of the opportunity to have unbiased representation, as they will pay for the representation regardless. This will significantly improve the opportunity for tenants to receive favorable lease terms, see all available spaces, and extinguish any conflicts of interest that could negatively affect their business.