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Brokerage Commissions

By David P. Resnick
October 14, 2016

When negotiating the terms of a new relationship with a leasing broker, an owner of a multi-tenant commercial property or a tenant seeking to sublease its space may be presented with a written brokerage agreement that is lengthy and complex. The amount of commission payable and the time and manner of that payment can be difficult to discern from boilerplate provisions.

A Brief Overview

Leasing commissions often present a unique and confusing line item in a property budget. Though they are a capital expense and impact the cash flow of the property, commissions are generally not accounted for in net operating income and are not passed through to tenants as part of operating expenses. Like many other transactional expenses, commissions vary greatly between markets and industry sectors. A commission structure that is appropriate for an office property in New York might be wholly inappropriate in Chicago. Notwithstanding the market, sector or qualities specific to the property, a prudent owner will seek discounted commissions for simpler leasing transactions due simply to the fact that they require less time and fewer resources.

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