While all commissions are indeed negotiable, I have a different point of view from most owners of commercial properties. If it is a gross lease, the commission is most usually based on the gross lease and is usually not challenged. (The commission percentage may be challenged however).
However, if it is a NNN lease, or an incremental fixed maintenance/expenses and flat utilities charge per square foot, what is the difference? In the end it has all the elements of the gross lease; it is simply framed differently for the protection of the owner! It seems to me that the negotiation should be on the overall percentage, rather than pulling something out of the income side, which includes both base rent and NNN charges.
While the question does not ask about property management fees, this is something that really does "bug me", as best expresses an irritation. A property manager if managing a gross lease is usually allowed to charge on the gross income, because he or she is handling the paying of monthly expenses as part of the total responsibility. However, in a NNN lease some owners believe that the property manager should only be paid on a percentage applied to the base rent and not to the NNN charges. Very unfair, as it is more difficult to keep tract of NNN charges, apply them correctly and do the year end reconciliation, than to simply bill the tenant for a gross amount.
All brokers must be strong in their negotiation of commissions, as owners too often are looking out for #1. Negotiations must be "fair and balanced" as one major TV Network advertises.
Onward and Upward....
Oct 15, 2012