In this post, we’re exploring the role from the ‘flow of money’ and thinking about whether the landlord’s or the leasee’s needs are put first because of this.
In a commercial property framework, the ‘flow of money’ means the payment of a leasing agent by a landlord for securing the lease. While this is common practice in the property sector, it raises the question of whether this incentive (the commission) contributes to the actions of the realtor unduly favouring either the landlord or the leasee.
Do you know the flow of money?
A landlord will engage a rental agent to secure a rent deal; in return, the agent will be paid out a commission-based fee. This is whats called the flow of money (or even flow of commission). The particular tenant, meanwhile, is going to be required to deal with the particular leasing agent to be able to obtain the lease.
Will the flow of money favour the landlord or the leasee?
The question regarding whether a leasing agent is ultimately behaving in the best interest with the leasee or landlord is really a complex and delicate one. Understandably, the character of the lease or engagement with the landlord will affect the characteristics of the proceedings.
For instance, if a commercial renter is seeking long-term surety for their business, they may engage in a lease term of 3, 5 or 10 years. For the leasing realtor, this means any prospective income arising from the particular transaction will only happen at these relatively long intervals. This will impact any benefit the agent stands to get from the transaction, particularly when this is the only property they are representing for this landlord.
On the other hand, if your leasing agent is symbolizing a landlord around multiple properties, there is a potential to gain multiple fees within the exact same period. This improved incentive could potentially affect the actions of the realtor, who may act strategically in order to increase their earnings.
While most agents will provide impartial information in order to help a fair deal for all events, the fact remains that the details an agent discloses to a potential leasee is up to their discretion. This technically means that the tenant or landlord could finish up being deprived if the pull of commission swings the particular favour in the other.
Brokers vs CRES - that do they favour and who pays?
It’s furthermore worth considering the role of broker commissions and company real estate services (CRES), which could work in the prefer of either the landlord or the property occupier.
Brokers act upon behalf of the landlord. They are paid the commission when they are been shown to be the “effective cause” of the lease transaction, e.gary. by providing an approved offer you and a signed lease. The broker’s commission is actually added to the cost of the particular tenant’s lease rental and also amortised over the cost of the lease - so essentially, the tenant pays the commission.
CRES providers represent the actual interests of the occupier from the properties (the renter or the owner-occupier). Their knowledge of commercial property can benefit customers by helping them save money about rental and house expenses, and minimising risk through assisting with strategic property decisions. CRES providers are typically paid by the get together whose interests these people represent and are not usually paid from the house funds.
How can impartial Property Reviewed help level out the arena?
As discussed above, the current flow of money method creates a ‘loophole’ which means, in some instances, a potential tenant may well not receive the complete picture in regards to a commercial property, together with certain pieces of information remaining undisclosed. This leaves the actual leasee at a distinct downside when making a decision on a commercial property.
By giving an online platform in which lets former and current tenants leave unbiased reviews about a property, we try to close this space and bring much-needed transparency towards the commercial property business.
Future tenants reap the benefits of clear and available information about the property, although property owners and supervisors gain access to valuable home analytics and informative feedback about their space.