Insights

News and info from Saratoga Commercial Real Estate

What is a Tenant Representative Broker and Why You Need One

Published by Ken Reinschmidt, November 4, 2020

A Tenant Representative Broker exclusively represents the needs and interests of a tenant when negotiating a lease. This is important as most landlords have their own broker representatives, who represent the needs and interests of the landlord. This is similar to a real estate transaction in which buyer and seller each has their own broker representing them.  A tenant representative real estate broker works for the tenant and brings their knowledge and experience to the process of understanding specific space needs, finding a location, writing an offer, negotiating favorable lease terms, and ultimately advocating for the tenant (their client). This is part of their fiduciary duty as a tenant representative broker. 

An experienced tenant representative broker knows the local market and will highlight multiple locations and their costs and benefits. Often a broker will include locations that are not being publicly marketed.  A tenant will not only be able to choose the best location for their business, but will also gain a valuable understanding of the market through their broker representative.

Once a favored location has been identified, a tenant representative broker will work with a Tenant to craft an offer.  An experienced tenant broker will have in -depth knowledge and help the tenant craft an offer that will include many more details than just price.  A seasoned broker will draft an offer to include many benefits and protections for a tenant that are consistent with the local market. This offer should also be compatible with the tenant’s business model, growth projections, and mitigate risk.

After an offer is made, negotiations typically follow.  An experienced broker respects their client’s/tenant’s interests, keeps information confidential, and fights for terms that meets their needs.  Negotiations do not stop once all of the basic deal terms are mutually agreed upon by both landlord and tenant.  The landlord and their broker representative will provide a lease contract for review and signature.  An experienced tenant representative will review the lease along with the tenant and their chosen attorney. While tenant representative brokers cannot offer legal advice, they can offer a broker review of the lease and confirm that it reflects the agreed upon terms and that it is consistent with a fair market lease. A fair market lease should be balanced, and not landlord oriented, where the landlord has more rights and protections than the tenant. A lease is a legally binding agreement and should therefore always be reviewed prior to signing.

Working with a tenant representation broker provides valuable services that often saves a tenant many thousands of dollars as well as sets them up for success with their commercial space. While you might expect that this service is expensive, many are surprised to learn that this service is almost always paid for by the landlord. A leasing commission for a new lease will be paid either entirely to the landlord’s representative broker or split between the two representatives. Each party deserves representation, and a tenant will only stand to benefit when working with a qualified commercial tenant representative broker.