is it standard to pay all the commercial broker's commission at the beginning of the lease?

When signing a contract with a broker are there other terms other than paying all the commission up front, such as annually.
In Property Management - Asked by lonnie n. - Jun 27, 2011
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Answer(s)

Robert P.
Owner/Investor
Vineland, NJ

We work with brokers and we tend to negotiate the payment terms depending on the property and anticipated transaction. Sometimes, we will pay the full commission at the beginning of the Lease and sometimes we will schedule a pay-out of the commission. I don't know if anything is "standard" anymore.
Joe Sternberg

Jun 27, 2011
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Robert T.
Broker/Agent
Bethesda, MD

most of our payments are made 1/2 at lease signing and 1/2 upon tenant occupying space and paying first months rent. there are variations of this method but you get the idea.

Jun 28, 2011
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Ron R.
Broker/Agent
Barrington, IL

I typically write in that all commissions are due upon a fully executed lease. Once the lease is signed by all parties i submit my commission statement to the other side. I do agree that there is no real standard in todays marketplace but do everything you can to get paid early on.
Hope this helps.

Jun 28, 2011
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Damon D.
Broker/Agent
Bala Cynwyd, PA

Nothing is standard - everything is negotiable. For the brokers that will agree to an "as collected" commission, most probably wouldn't agree to an annual payout but would seek monthly and may agree to quarterly depending on the deal. Also, keep in mind, the rate on as collected commissions is higher versus the payout, as the payout commission was designed as an incentive to brokers to take a discounted amount for payment today versus the higher rate over time.

Jun 28, 2011
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Marv P.
Broker/Agent
Beverly Hills, CA

I'd say yes this is standard. Half due upon execution, half due upon occupancy. The broker has earned his commission once he has brought you a tenant which you deem suitable for your property. You screen prospective tenants, you make the decisions. Broker's commission should not be tied to Landlord's receipt of rent payment. It is inequitable to the Broker involved to withhold payment of its commission. The broker is not a partner in your property and should, therefore, not share in the risk of the tenant's default after Landlord has screened and accepted the tenant.

Jun 28, 2011
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Marv P.
Broker/Agent
Beverly Hills, CA

I'd say yes this is standard. Half due upon execution, half due upon occupancy. The broker has earned his commission once he has brought you a tenant which you deem suitable for your property. You screen prospective tenants, you make the decisions. Broker's commission should not be tied to Landlord's receipt of rent payment. It is inequitable to the Broker involved to withhold payment of its commission. The broker is not a partner in your property and should, therefore, not share in the risk of the tenant's default after Landlord has screened and accepted the tenant.

Jun 28, 2011
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Northern O.
Listing Administrator
Valley View, OH

Usually this is our standard of prctice in North East Ohio.

Jun 28, 2011
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Ann S.
Broker/Agent
White Plains, NY

The answer is yes we brokers are paid at lease execution. While everything is negotiable this is one that deserves some thought. When a job is complete we should be paid. Yes I do occasionally agree to a payout but the payout is never longer than a year and ususually, as other have suggested, 50% at lease execution and 50% at rent commencement.

Jun 29, 2011
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Bernie D.
Broker/Agent
Woodbridge, CT

We have a standard contract that states commissions are payable upon execution of a lease. Most Lessors are concern about a tenant going out of business before the initial lease term is completed. If we lease a space for five years and the tenant leaves in three years we will release the property for another five years and only charge a commission for three years. Everything is negotable but do it before you sign the listing agreement.
Bernie

Jun 30, 2011
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Aurelio M.
Broker/Agent
Torrance, CA

Yes it is, so make sure you have a solid tenant and a good security deposit from the tenant.

Jun 30, 2011
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Marty H.
Broker/Agent
Lenexa, KS

As one can see from the other comments, Brokers expect to be paid for their efforts in the manner agreed to in the listing agreement. Thus, if the client anticipates having any difficulty making payment, the problem should be discussed in advance of the listing agreement being signed.
Once a tenant has been identified, if you are nervous about paying the commission at the time the lease is signed, that feeling either stems from not having the cash to do so or from being worried that the tenant won't fulfill the terms of the lease. If cash is "tight" I might be willing to accept an interest bearing promissory note with proper collateral. However, this would be a very rare occasion. As a landlord you do not want to gain a slow pay reputation. Believe me, word will spread fast....particularly in instances where multiple agents are working together on the transaction.
On the other hand, if you are worried that the tenant will not fulfill the terms of the lease, perhaps the tenant isn't one that you want to accept. If the tenant doesn't appear to be financially qualified, then you probably shouldn't enter into a lease with them. As a landlord, if you are nervous about a particular prospective tenant, you need to take steps to see if you can get "comfortable" with them. Depending on the circumstances, you may need to ask for financial statements, references, perhaps a personal guarantee, credit reports, etc. If these items don't lend proper credability to the tenant you may want to reject them. Personally, I'd never try to talk a client into accepting a tenant that they weren't comfortable with. In fact, I've even talked clients out of leasing to prospective tenants that I felt uncomfortable with.
While a real estate broker has a wide range of responsibilities and duties to his or her client, they cannot guarantee that a tenant will fulfill each and every lease obligation. In other words, Brokers aren't in a position to provide the landlord with tenant "insurance" as a part of their services. Insurance of this nature can only be obtained from insurance companies which specialize in this field.

Jul 5, 2011
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Walter C.
Property/Asset Manager
Englewood Cliffs, NJ

There are many "standards" regarding both the amount and the timetable of brokerage commissions in the NYC area. It all boils down to the relative strength of the proposed tenant, and the space to be rented. Negotiated commission amounts and payouts over 12 to 18 months are common, especially when the Landlord is negotiating from strength.

Jun 5, 2013
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