Finding a new location is tough enough when you have the right team in place, and it can be even more difficult when you’re on your own. Although I explain to my clients what our representation agreement means, not everyone fully understands how to work with a commercial real estate broker.
Once you’ve hired a broker to help you find a space, they’re on your team – they’re looking out for your best interests and finding you the best deal for your situation. In order to get the most out of your broker, you should trust them to do the heavy lifting. Let your broker conduct the search and assist in negotiations.
If you find a property that you like and your broker hasn’t shown it to you, let them know about the property so they can do the research. You don’t want to find yourself in a situation where you have to pay your broker’s fee because you opened negotiations on a property. Landlords and listing brokers don’t appreciate having a broker brought in after they’ve already started speaking with you – why should they pay a broker for their services when they really haven’t done anything?
Here’s What Happened to One of My Clients When They Did Just That:
The office manager for an electrical contractor called me inquiring about a property that I had listed. After she explained what they were looking for, I told her that my building wasn’t a good fit for their use, but that I could come by their office to see if I could help them in site location. I met them at their office to see how everything was set up, then we discussed their needs, and I told them I would be willing to bring them on as a client.
We discussed what my representation would entail and how I would bring them any property I could find that fit their criteria. If they found something that I hadn’t, I could make the phone call and get all the information needed. I would also assist in negotiating the letter of intent and advising them on the lease, which is where many businesses make mistakes.
I pulled together a list of available properties that would work for them, and we went on site tours for weeks. Nothing seemed to be just right for them, but we continued our search for their office relocation. Unfortunately, Nashville’s current popularity means there isn’t very much suitable space available, and this can make the search very difficult.
About a month into working with them, I pulled the latest list of properties again so that we could keep moving forward with finding a new office. After sending the office manager the new list of properties for us to review, I get a response that they’ve found a property and are finalizing the lease.
Now, keep in mind that we had a very open line of communication, and it hadn’t been more than a day or two since we last spoke.
Imagine my surprise when I received that email. We had a representation agreement that stated I would be their point of contact on all sites and negotiations, regardless of whether I found it or they did. Even if I didn’t find the space, my expertise in negotiations is invaluable to my clients. There are so many details that can come back to haunt a tenant in a lease, and that’s what I can protect against.
I reminded the office manager that I was representing them, and if the landlord wasn’t willing to pay my fees that it would be my client’s responsibility. The office manager got me in touch with the property owners, and because we had an agreement from a month prior, the landlord did agree to pay my fee. We dodged a bullet there, but since they were already signing the lease, I couldn’t review the document or make any recommendations for my client. The lease is ultimately what comes back to bite them in the ass.
Almost immediately after they moved in, we started noticing many issues with the office. The owners had “renovated” it before my client moved in, so they assumed everything was fine with the property. Unfortunately, they were wrong.
I highly recommend to anyone looking to lease or purchase commercial space that they hire an inspector to walk through the property and write a report on the status of the premises. Doing so helps tremendously in lease negotiations because you’ll know which items the landlord needs to repair and which items they will have to retain responsibility for due to age, neglect, etc.
Every issue that we found with the property would have already been discovered if there was time to have an inspector walk through the property. Stairs weren’t constructed to code, the doors had one-inch gaps at the bottom to let air/bugs/water in and out, the roof leaked every time it rained, and the list went on and on. To top it all off, the HVAC unit blew out and stopped working upstairs. HVAC is one of the first maintenance issues I review when I receive a lease because of how devastating it can be when the unit goes out.
If I can’t get the landlord to take full responsibility for the HVAC, I’ll at least cap my client’s HVAC expenses to around $1,500 annually. Doing so allows the tenant to pay for any minor repairs, and if the unit blows out, they won’t get caught paying for a shiny new $10,000 unit for the landlord
I notified the landlord that they are in default of the lease. According to several clauses in the lease, they are responsible for repairing and maintaining the structure, including the roof leaks, which they didn’t fix. Their broker told my client to “get a shopvac to clean up the water,” and said he didn’t see any issues.
Unfortunately, even though the landlord is blatantly in default of the lease, we cannot seek any damages unless my client hires an attorney. As of the writing of this post, we’re searching for a new location so we can get them out of this building. Our best option at this point is to terminate their current lease and move on.
Don't Take Shortcuts When Leasing Office Space
The process of leasing space is very important. Do not try to take any shortcuts or get around your broker when searching for space. If your broker is doing a poor job, then fire them and hire someone else. It’s best not to try and approach the deal on your own – landlords do this for a living and they have professionals representing them. The last things you want to deal with when you’re trying to grow your operations are leaky roofs, foggy windows, and blown out HVAC units.
What hurts the most is that all of this could have been prevented if they’d allowed me to do what they hired me to do!
Don't let this happen to you. Contact us today so Tyler can take care of your leasing process, and you can focus on growing your business.