In this post, we’re exploring the role of the ‘flow of money’ and contemplating 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 landlord for securing a lease. While this is common practice in the property sector, it raises the question of whether this incentive (the commission) leads to the actions of the broker unduly favouring either the landlord or the leasee.
Do you know the flow of money?
A landlord may engage a leasing agent to secure a hire deal; in return, the actual agent will be paid a commission-based fee. This is whats called the flow of money (or even flow of commission). The tenant, meanwhile, will probably be required to deal with the leasing agent so that you can obtain the lease.
Does the flow of money favour the landlord or the leasee?
The question regarding whether a leasing agent is ultimately behaving in the best interest from the leasee or landlord can be a complex and sensitive one. Understandably, the character of the lease or even engagement with the property owner will affect the characteristics of the proceedings.
For example, if a commercial renter is seeking long-term surety for his or her business, they may engage in a lease term of 3, 5 or 10 years. For the leasing agent, this means any potential income arising from the particular transaction will only happen at these relatively long intervals. This may impact any help the agent stands to get from the transaction, especially if this is the only property they are representing with this landlord.
On the other hand, if your leasing agent is which represents a landlord throughout multiple properties, there is a potential to gain numerous fees within the identical period. This increased incentive could potentially influence the actions of the agent, who may act strategically in order to maximise their earnings.
Some agents will provide impartial information in order to aid 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 do they favour and who pays?
It’s furthermore worth considering the role of broker commissions and company real estate services (CRES), which can work in the favor of either the owner or the property occupier.
Brokers act on behalf of the property owner. They are paid the commission when they are shown to be the “effective cause” of the lease transaction, e.g. by providing an approved provide and a signed hire. The broker’s commission will be added to the cost of the tenant’s lease rental and amortised over the cost of the lease - so essentially, the actuel pays the percentage.
CRES providers represent the particular interests of the occupier with the properties (the renter or the owner-occupier). Their knowledge of commercial property may benefit customers by helping them save money about rental and home expenses, and minimising risk through helping with strategic home decisions. CRES providers are typically paid by the get together whose interests these people represent and are not typically paid from the property funds.
How can neutral Property Reviewed help 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 actual leasee at a distinct downside when making a decision over a commercial property.
By providing an online platform that lets former and current tenants leave unbiased reviews about a property, we try to close this gap and bring much-needed transparency for the commercial property market.
Future tenants reap the benefits of clear and open up information about the property, while property owners and administrators gain access to valuable home analytics and insightful feedback about their area.