A Tenant Representative is Your Best Ally During Lease Renewals
After 30 years of being in the business, I still hear from tenant clients on their lease renewals: “Why should I use a broker to represent me, wouldn’t I get a better deal if I just used the landlord agent, or just negotiate a term direct with the landlord.” Many tenants also believe that either they have to pay a commission, or if a landlord doesn’t have to pay a commission to the tenant’s broker then the landlord will pass along the savings to them. Lastly, many tenants believe that since they’ve been through lease negotiations in the past, then they know what to do for a lease renewal. These lines of thoughts may and usually does not get the tenant the best deal.
Unfortunately, these are all misconceptions that affect the negotiating power of a tenant. When starting a lease negotiation a tenant automatically starts off at a disadvantage, they are not aware of what concessions a landlord may be willing to give, or has given to other tenants. Knowledge, as is usually the case, is the most powerful tool a tenant can have in negotiations. The goal of a landlord, and their agent, is to get a better deal than the one previously. A listing agent is duty bound to protect the interests of the landlord, and have the landlord’s best interest in mind. They want to keep the landlord happy by getting the best deal for them so that they don’t lose the listing. If a landlord has an advocate on their side to get them the best deal, wouldn’t it be wise for the tenant to also have one? Without a representative, a tenant must rely on solely their own knowledge of the market place.
The second misconception is that the tenant will have to pay the commission to their agent. This is not usually the case. Most landlords already have a commission built into their lease renewal expectations, and if they have a listing agent, that agent will many times get the full commission if the tenant does not have an agent. Additionally, if the landlord does not have to pay a tenant’s rep commission, rarely do they pass along the savings to a tenant. After all, the property is an investment for the landlord and they are looking to get the best return for their investment and any savings they may realize wouldn’t be passed along to a tenant.
Experience. I hear this all the time: “I’ve negotiated a lot of commercial leases, I know what I’m doing." Even if the person has in a previous job negotiated a dozen leases, this does not compare to a seasoned tenant representative that may have negotiated hundreds. Most importantly though is that the tenant rep has negotiated leases in the current market. Real estate, like many things, is very fluid - the dynamics change over time, and properties and neighborhoods fall in and out of flavor. A tenant rep will have access to data a tenant just won’t have, what were the deal points on leases negotiated across the street, what other alternatives are available to the tenant, and even what may have been negotiated for another tenant in the same building. By capitalizing off of this knowledge base, a tenant rep will be able to place the tenant in a position of power, and assist in negotiating the best terms for the tenant.
Ultimately, it boils down to this: A tenant should have an agent represent them on any lease renewals, it doesn’t cost them anything to have an advocate on their side who is looking out for their best interests, not the landlords.