Why are you asked to sign a Tenant Representation Agreement when you start looking for commercial real estate?
If you are reading this, you are likely just starting the process of leasing commercial real estate.
Many people start the process by asking Siri, Alexa, or Google to get an overview of the market. There is nothing wrong with that. But the results are not comprehensive, include paid advertising listings, lack key information, and don't represent the true market conditions.
You may decide to reach out to each broker from the search results with listings that roughly meet your criteria. If so, you'll find that interacting with multiple brokers to request asking rents, flyers and current floor plans for each of the alternatives can be time consuming.
Avoid Conflict of Interest
Maybe you know someone in real estate that can help you vet the alternatives and even pre-tour to confirm the fit before you start to tour. Everyone does. It may be your kid’s little league coach, college roommate, neighbor, relative or someone you sit next to on the commute train. Commercial real estate is a “relationship” business, so people tend to work with brokers they know. Makes sense.
Until it doesn’t. More than 90% of commercial real estate firms represent both landlords and tenants. This creates a built-in conflict of interest that few tenants understand, and even fewer brokers discuss. No one would hire a lawyer who works for the other side. Yet, the equivalent happens every day when tenants work with commercial real estate brokers and firms that also represent landlords. So, ask your broker if they or anyone else in their office represents landlords. If so, you have a built-in conflict of interest.
At CroninCRE we work exclusively as representatives of tenants without conflict of interest. Every opportunity in the market will be researched and presented to you. We are only focused on finding value and multiple alternatives, many of which aren't found by asking Siri, Alexa, or Google.
Why sign a Tenant Representation Agreement?
Once you select a tenant broker to start looking for commercial real estate, they will likely request that you sign a Tenant Representation Agreement. So, why sign it?
A written agreement is the most appropriate and legally safe way to create an agency relationship. Even though tenant representatives like CroninCRE are typically paid by the landlord, they have a fiduciary duty to represent your needs in everything they do. The agreement establishes the fiduciary relationship in writing.
Simply put, the Tenant Representation Agreement means there are no other brokers working with you for this transaction. Before a tenant broker begins the search process below, they want to be assured that they are going to be compensated for dedicating their time and attention to creating multiple alternatives for you.
You couldn’t stay in business if you worked for free all day. The Tenant Representation Agreement makes sure your tenant representative is compensated.
Without an agreement you don’t really have someone on your side. If your broker isn’t asking you to sign a Tenant Representation Agreement, you may have a broker with a conflict of interest.