Expert: Jim Avancena, CPM - 11/2/2007

Question
If I hired a brokers to represent me in subleasing my current office space, why should I have the obligation of paying two brokers fee?  

Answer
Gwen-
About twenty years ago the commercial real estate industry became a step more specialized when some brokers saw an opportunity to differentiate themselves from the mass of real estate brokers, and offer a different type of service representing the buyer or lessee instead of the seller or lessor.  I also believe that many agents had grown weary of
a majority of them always making the best deal possible for the sellers or lessors(landlords) at the expense of the buyers and lessees(prospective tenants).  

By being open and above board from the outset, buyer brokers found a new market to offer their skills: the buyers and lessees(prospective tenant/renters) who previously had to take their chances without anyone representing their interests.  By truly giving the tenants and buyers the best advice about how to make the best deal for themselves, the tenants and buyers quickly learned that by hiring a specialized tenant broker or buyer broker, they usually made much more beneficial transactions for themselves.

The property owners selling their property and the landlords leasing their office space or store space, didn't like what they initially perceived as brokers that had turned their backs on the owners and landlords because these brokers were making it harder for them to make the more lucrative deals that they made before the buyer agents started offering their services and helping the other side of the transactions.

There was a significant amount of friction between the owners agents and buyers agents at first, but after awhile, the owners and landlords started to realize that the buyer and tenant agents were the ones that represented many or most of their customers!

The industry had formerly paid the full amount of commission to the sellers or lessors broker when a deal was made.  Now that the buyers and prospective tenants had their own agent representing their interests, the industry quickly adopted the practice of paying the owners agent and buyers agent each one-half of the total commission.

In your situation, the standard practice is to pay one-half of the total sublease commission to each agent.   You are not "obligated" two pay anyone a brokerage fee except for the fees you have agreed to pay in your formal "listing" agreement (your subleasing contract) with your agent - in this case called the "listing" agent.

If you believe that it would be helpful to also get the brokers that represent the buyers and tenant renters to bring their clients to your property -  which usually means you will sell or lease your property sooner -  then you should add the provision to your "listing" agreement with your broker, and provide for paying half of your total fee to the buyer's or lessees' agent.   Commonly, the broker or agent that is representing the buyer or tenant renter (or "lessee"), is referred to as the "cooperating broker".

I hope this is clear now, however, my explanation is actually much more simplistic than many of the sale or lease transactions can be, as there are actually many variations regarding how real estate agents and brokers are paid.   The important thing to keep in mind is that it is the duty of the owner/seller and landlord/lessor to have a written listing agreement that specifically states how much commission you  are paying to sublease your office, and how that commission will be split given the various ways that other "cooperating" agents might become involved in helping to sublease your office space by having their client contract to sublease your office from you.   Note also that; unfortunately for you, the prime tenant (that is you in this case) traditionally pays a slightly larger percentage commission to the agent or agents involved in realizing a sublease than the commission paid for a regular (prime) lease.

It is absolutely critical that you clearly tell each broker or agent that calls you or your agent on what basis you are subleasing your office space - especially if you are NOT splitting your commission payment with a cooperating broker or agent.   By being very clear and straight forward about the structure of the compensation you will pay to cooperating brokers at the very beginning of your marketing process, you will avoid becoming involved in lawsuits over commission "misunderstandings" or attending hearings at the local board of realtors to hear aggrieved brokers or agents present their case for why you should or will not have to pay them a commission.

Remember, you should not be paying two (2) FULL brokers fees, rather, one (1) FULL brokers fee SPLIT between two brokers.

This can become a very complicated subject, so I have tried to keep it simple for only the situation that I think you are describing to me.   Good luck.  Try your local realtors board to help explain this matter to you for the exact situation in which you find yourself.

Best wishes.

-Jim