In the following paragraphs, we’re exploring the role of the ‘flow of money’ and considering whether the landlord’s or the leasee’s needs are put first consequently.
In a commercial property circumstance, the ‘flow of money’ refers to the payment of a leasing agent by a property manager for securing the lease. While this is typical practice in the property sector, this raises the question associated with whether this motivation (the commission) results in the actions of the broker unduly favouring either the landlord or the leasee.
What is the flow of money?
A landlord will certainly engage a renting agent to secure a rent deal; in return, the particular agent will be compensated a commission-based fee. This is whats called the flow of money (or even flow of commission). The tenant, meanwhile, will probably be required to deal with the leasing agent so that you can obtain the lease.
Does 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 a complex and delicate one. Understandably, the type of the lease or perhaps engagement with the landlord will affect the characteristics of the proceedings.
For instance, if a commercial renter is seeking long-term surety for 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 home they are representing for this landlord.
On the other hand, in case a leasing agent is symbolizing a landlord around multiple properties, there is the potential to gain multiple fees within the exact same period. This improved incentive could potentially influence the actions of the agent, who may act strategically in order to increase their earnings.
Some agents will provide impartial information in order to help a fair deal for all events, the fact remains that the info an agent discloses to some 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 favour in the other.
Brokers vs CRES - that do they favour and who pays?
It’s additionally worth considering the role associated with broker commissions and corporate real estate services (CRES), which could work in the prefer of either the landlord or the property occupier.
Brokers respond to behalf of the landlord. They are paid any commission when they are shown to be the “effective cause” of the rent 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 amortised over the cost of the lease - so essentially, the tenant pays the fee.
CRES providers represent the actual interests of the occupier from the properties (the renter or the owner-occupier). Their understanding commercial property will benefit customers by supporting them save money upon rental and property expenses, and minimising risk through helping with strategic house decisions. CRES providers are usually paid by the party whose interests they represent and are not generally paid from the property funds.
How can neutral Property Reviewed assist level out the playing field?
As discussed over, the current flow of money system creates a ‘loophole’ which means, sometimes, a potential tenant may not receive the complete picture with regards to a commercial property, with certain pieces of information leftover undisclosed. This leaves the particular leasee at a distinct disadvantage when making a decision on the commercial property.
Through providing an online platform that lets former and also current tenants depart unbiased reviews about a property, we aim to close this gap and bring much-needed transparency to the commercial property industry.
Future tenants benefit from clear and open information about the property, while property owners and administrators gain access to valuable home analytics and informative feedback about their space.