Conflicts relating to tenants in commercial property

It is becoming increasingly common as the market intensifies with competition for smaller property agents to act as a “Nominated Agent”.

A nominated agent attempts to act as a tenant rep / tenant advocate for a tenant and seeks property listings from other agents in the market.

The potential for various conflicts here is a major issue to the tenant as they are the ones who end up missing out on incentives.

A number of issues arise:

  • Nominated agents can still be under pressure to ‘push’ buildings in certain landlords portfolios

  • A nominated agent that also represents a landlord is likely to be driven by a fee structure that rewards them to have a tenant on the highest rent possible. This is the opposite to a tenants wants and need

  • Nominated agents gain their fees and commissions from the landlord when the lease is signed. This can result in double the payment out of the incentive the tenant has the potential to receive. Be careful of the ‘don’t pay now’ approach

  • A tenant does not (necessarily) have access to the whole market, as other agents may refuse to put forward their property listings to a competitor

  • Landlords offer many other inducements on top of the normal scale of fees to encourage agents to bring a prospective tenant to their builds. It is common practice within the industry for landlords and agents to ‘build relationships’ with each other and landlords offering a range of “gifts” or indirect incentives. As the saying goes, there is no such thing as a free lunch.

The potential for various conflicts here is a major issue to the tenant as they are the ones who end up missing out on incentives.

An agent will likely favour an opportunity to complete a deal when the greatest fee is being offered and more than likely this will not benefit the tenant. In the industry, an agent that is able to close a deal with a tenant at above market value refers to the deal as “good agency”. It is a great result for the agent and their agency, but not so for the tenant.

Be warned by being unrepresented – this is a risk to you the tenant – or by being represented by someone with conflict. Engaging an independent tenant rep/tenant advocate can save you hundreds of thousand dollars of capital cost and the fee for consulting with them is a fraction of the overall occupancy cost a tenant incurs during a five year lease term*.

A tenant needs to engage an independent tenant representative/advocate to level the playing field against agents and landlords. For more information contact us today.

*Example lease term

 

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