In this article, we’re exploring the role with the ‘flow of money’ and considering whether the landlord’s or the leasee’s needs are put first because of this.
In a commercial property context, the ‘flow of money’ refers back to the payment of a rental agent by a property owner for securing any lease. While this is frequent practice in the property sector, that raises the question regarding whether this inducement (the commission) contributes to the actions of the agent unduly favouring either the owner or the leasee.
Do you know the flow of money?
A landlord will engage a leasing agent to secure a hire deal; in return, the actual agent will be paid a commission-based fee. This is called the flow of money (or perhaps flow of commission). The actual tenant, meanwhile, will be required to deal with the particular leasing agent to be able to obtain the lease.
Will the flow of money favour the owner or the leasee?
The question associated with whether a rental agent is ultimately acting in the best interest from the leasee or landlord is really a complex and sensitive one. Understandably, the nature of the lease or even engagement with the property owner will affect the character of the proceedings.
For example, if a commercial tenant is seeking long-term surety for their business, they may engage in a lease term of 3, 5 or 10 years. For the leasing agent, this means any prospective income arising from the particular transaction will only take place at these comparatively long intervals. This can impact any benefit the agent stands to gain from the transaction, particularly when this is the only house they are representing with this landlord.
On the other hand, if a leasing agent is representing a landlord around multiple properties, you have the potential to gain several fees within the exact same period. This improved incentive could potentially impact the actions of the realtor, who may behave strategically in order to increase their earnings.
While most agents will provide unbiased information in order to facilitate a fair deal for all celebrations, the fact remains that the info an agent discloses to some potential leasee is up to their own discretion. This technically means that the actuel or landlord will finish up being disadvantaged if the pull regarding commission swings the actual favour in the other direction.
Brokers vs CRES - that they favour and who pays?
It’s furthermore worth considering the role of broker commissions and company real estate services (CRES), which may work in the favour of either the owner or the property occupier.
Brokers respond to behalf of the landlord. They are paid the commission when they are been shown to be the “effective cause” of the hire transaction, e.g. by providing an approved offer and a signed lease. The broker’s commission is actually added to the cost of the particular tenant’s lease rental and also amortised over the cost of the lease - thus essentially, the actuel pays the percentage.
CRES providers represent the particular interests of the occupier with the properties (the actuel or the owner-occupier). Their understanding commercial property will benefit customers by assisting them save money on rental and property expenses, and reducing risk through aiding with strategic house decisions. CRES providers are generally paid by the celebration whose interests these people represent and are not typically paid from the property funds.
How can neutral Property Reviewed assist level out the game?
As discussed above, the current flow of money program creates a ‘loophole’ which means, in some cases, a potential tenant might 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 downside when making a decision over a commercial property.
By giving an online platform which lets former as well as current tenants depart unbiased reviews in regards to a property, we try to close this space and bring much-needed transparency towards the commercial property industry.
Future tenants take advantage of clear and open up information about the property, while property owners and managers gain access to valuable house analytics and informative feedback about their space.