As a commercial real estate lawyer, I like that almost every person and business has some connection to real estate.
Nearly everyone lives somewhere (everyone either rents or buys real estate), and every business rents or buys sufficient property for its operations. Real estate lawyers might be second only to doctors in how many people at a party have a question for them when they find out what they do.
I am not a real estate broker; I make no commissions when clients buy, sell or lease property, and I have no vested interest in recommending the use of real estate brokers. That said, when a business is planning a real estate transaction, a qualified broker can assist in meeting its real estate needs and potentially achieve significant savings.
Businesses often engage the services of a real estate broker for their commercial real estate needs, such as renting space or buying property, selling real estate, assigning a lease or subleasing space.
My initial recommendation when using a real estate broker is to choose a brokerage that has significant experience in the particular type of real estate and in the particular location you’re looking at.
In Florida, brokers do not need written commission agreements to claim a brokerage commission. Oral agreements can suffice. Once you have selected a broker for a real estate assignment, have the understanding put in writing.
If you’re a buyer or tenant using a broker, in the South Florida commercial real estate market, most brokers require the client to engage the brokerage on an “exclusive basis.” That means that the broker is appointed to represent the business in any transaction contemplated by the assignment, and the broker expects to be paid a commission whether or not the client utilizes the broker’s services for a particular transaction. (If you do not want the broker involved with a particular property that you are considering, that must be an exception in the engagement letter.)
In the South Florida commercial real estate market, the seller or the landlord, as the case may be, is normally going to pay your broker’s commission. Your engagement letter with the broker should clearly provide that, although the brokerage is appointed to act on the client’s behalf, the brokerage may only look to the seller/landlord for payment of any commissions, and that the brokerage may not look to the client for any commissions.
While there is the potential for a broker to not negotiate the best deal possible — because the more the client pays to buy or rent the property, the higher the commission will be — in my experience, the top commercial real estate brokers assist in getting the best deal possible. Repeat and referral business are excellent motivators.
If you will be engaging a broker for the sale of real estate (or locating a tenant to rent property you own or a subtenant for property that you lease), the issues are more complicated because you will be paying the commission. The brokerage agreement will be more involved, and should be reviewed by an experienced real estate attorney.
Generally, the agreement needs to state the amount of the commission, how and when it is earned and paid, and that the broker gets a commission only if and when the transaction closes, so that if a buyer defaults under the purchase contract, the brokerage would not keep some portion of the buyer’s deposit.
Experienced, professional real estate brokers can be a terrific part of your company’s real estate team, but as in anything else, always get it in writing.
Eric D. Rapkin is a shareholder in the Fort Lauderdale office of Akerman Senterfitt and concentrates in real estate law. Reach him at (954) 759-8962 or [email protected].