REA Monthly November 2009

Why “TENANTS” Need Written Tenant Representation Agreements!
October 6, 2009 - By Andrew Zeza's Blog

…because only with a written representation agreement can a real estate broker or advisor represent the interests of a tenant or a buyer! Absent a written agreement clearly stating that the broker represents the tenant or buyer, under common law the broker likely has an obligation to protect the interests of the landlord or seller. That’s right! This is true even if the landlord or seller already has a broker representing it!

What corporate executive in his or her right mind would work with a real estate broker whose job is to negotiate against the executive’s company? Besides, don’t landlords engage brokers via written agreements? Don’t companies engage executives via written employment agreements? Employment agreements, representation agreements, and the like serve, among others, one very important purpose…they set down the terms of a relationship between employer and employee, service provider and client, or otherwise. So, why wouldn’t a company “employ” its broker or advisor, especially given the risks of not doing so?

The process of engaging a broker or advisor to represent the interests of your company is very simple. First, select the right commercial real estate broker that is qualified to address your company’s specific objectives. Then engage the broker via written agreement that clearly states that the brokerage company is obligated to protect your company’s interests. Address all the terms that are important to your company, including how the broker will be compensated (most often through commissions paid by landlords) and any other terms that are important to you. Then get to work on your real estate project knowing that your company will have an objective real estate representative authorized to advise it and negotiate on its behalf. It’s that simple!

By formally engaging a broker, your company will send a clear message to landlords, sellers, and others that it is serious and has thought-out its real estate project. Landlords and sellers also benefit when tenants and buyers engaged brokers, as doing so clarifies the relationships between the tenant, landlord or seller, and brokers.

There’s a lot more to this discussion. But for now…Enough Said!

The above is based on guidance I have received from numerous legal experts. I am not a legal expert. The above may vary from state to state or province to province. So, you may wish to validate how this works in your area.