Maintenance
Part of Quoted rent in commercial leasing: terms to review
Choosing commercial leasing advisers: what to settle yourself before the first call
Commercial leasing services sorted by who pays each one, what to settle before you call anybody, a scorecard for answers, and a single task that tests advisers.
Everybody in a letting transaction is paid by somebody, and in most cases that somebody is not you. Working out who pays whom is the fastest way to know which advice to weigh heavily and which to check.
This page sorts the help into roles, says who normally pays for each, and gives you a way to test somebody on a real task before you rely on them.
What to take away
- The agent showing you space is usually paid by the landlord on completion. Ask, early, and expect a straight answer.
- The two roles worth paying for yourself are a property lawyer and, on anything you will alter, a building consultant.
- Do the sizing and the permission checks yourself first. They are free, and they change what everyone else can sell you.
The roles
Letting agent. Markets the landlord's space. Knows the building, knows what has moved recently, and is paid when you sign. Useful, and not your adviser.
Who pays each adviser
Role
- Letting agent
- Landlord on signing
- Tenant rep
- You, landlord, or both
- Property lawyer
- You
- Building consultant
- You
- Accountant
- You
- Insurance broker
- You
Paid by
- Letting agent
- No
- Tenant rep
- Yes
- Property lawyer
- No
- Building consultant
- Yes
- Accountant
- Yes
- Insurance broker
- Yes
Can replace?
- Letting agent
- Tenant rep
- Property lawyer
- Building consultant
- Accountant
- Insurance broker
Tenant representative. A broker acting for occupiers rather than for owners. Paid a fee by you, a share of the landlord's commission, or both, and the arrangement is worth understanding precisely because those two produce different incentives.
Property lawyer. Reads the lease, the guarantee and the work letter, and tells you what they do together. This is the one role nobody else can replace, and the one most often engaged too late.
Building consultant or surveyor. Inspects the space, records its condition, and tells you what the repair obligation you are being offered actually exposes you to. Essential if you are accepting any responsibility for the fabric.
Accountant. How the commitment is treated, what sits on the balance sheet, and what the fit-out spend means for your accounts and your tax position.
Insurance broker. What the lease obliges you to carry, whether that is also what your business needs, and what it costs before you agree to it.
Project manager and designer. Only once the deal shape is settled. The roles and their incentives are in tenant improvements.
Follow the money
Ask everyone three questions, in writing, at the first conversation.
Three questions to ask
- Who pays you, and does it depend on building?
- Any relationship with this landlord or building?
- If I take none of these spaces, are you paid?
None of these is rude and all of them are normal. What matters is whether the answer is direct. An agent who says plainly that the landlord pays them is easier to work with than one who is vague, because you know exactly how to read what follows.
What to settle before you call anybody
- How much space you actually need, derived from how the work happens rather than from headcount. The method is in office space.
- Whether your activity is permitted at any address you are serious about, which is answered by the offices described in zoning and permits.
- What you can commit to, and what you would need a way out of.
- The two or three things that would kill a deal.
An occupier who arrives with those four settled gets better service from everybody, because there is less guessing and fewer wasted tours.
Settle before the first call
- How much space you actually need
- Whether your activity is permitted
- What you can commit to
- The two or three deal-killers
The scorecard
A good answer sounds like
- How was this area measured?
- On this basis, and here is what it includes
- Can I see reconciled service charge statements?
- I have asked; here they are, or here is the refusal
- What does the exit clause require?
- Here is the clause, and here is what it means for your fit-out
- Is there a guarantee?
- Yes, and here is what could be negotiated on it
- What is the total cost across the term?
- Here is the model, with the assumptions listed
A bad answer sounds like
- How was this area measured?
- It is what the landlord quotes
- Can I see reconciled service charge statements?
- The budget is in the brochure
- What does the exit clause require?
- You will deal with that at the time
- Is there a guarantee?
- It is what they always ask for
- What is the total cost across the term?
- Here is the rate
The last row is the whole test. Anybody who can only quote a rate is describing part of the cost, and the anatomy of the rest is in commercial leasing.
Good answers vs bad answers
Question
- How was this area measured?
- On this basis, here is what it includes
- Reconciled service charge statements?
- I have asked; here they are
- What does the exit clause require?
- Here is the clause and what it means
- Is there a guarantee?
- Yes, and here is what could be negotiated
- Total cost across the term?
- Here is the model, with assumptions
Good answer
- How was this area measured?
- It is what the landlord quotes
- Reconciled service charge statements?
- The budget is in the brochure
- What does the exit clause require?
- You will deal with that at the time
- Is there a guarantee?
- It is what they always ask for
- Total cost across the term?
- Here is the rate
Bad answer
- How was this area measured?
- Reconciled service charge statements?
- What does the exit clause require?
- Is there a guarantee?
- Total cost across the term?
Give them one real task
Pick a building you are seriously considering and set a deadline. Ask for the measurement basis in writing, the last two reconciled service charge statements, and a plain-language summary of what the lease requires of you on the last day.
One real task to set
- Pick a building you are seriously considering
- Set a deadline for the response
- Ask for the measurement basis in writing
- Ask for the last two reconciled service charge statements
- Ask for a plain-language summary of last-day lease obligations
- Read what comes backdid they ask, or characterize?
Read what comes back. Did they go and ask, or did they characterize? Is any of it something you could put in a file and rely on later? An adviser who returns a marketing pack has answered a question you did not ask.
Signs to walk away
- Reluctance to say who pays them.
- A refusal to obtain the service charge history, presented as unusual to request.
- Pressure attached to an offer that expires during your decision.
- Advice about your permitted use given without asking what you do.
- Any suggestion that the lawyer can be skipped on a small deal.
Where this fits
If the honest answer is that you should not be committing to a term at all yet, the flexible alternatives are compared in coworking space. If it is that you should own the building, the case is in commercial buying.
A free source of general small business guidance with nothing to sell is listed among the SBA's resource partners. For a sense of how a large institutional tenant approaches the same problem, the federal government's own process is described on the GSA leasing pages.
Common questions
Should I use a tenant representative?
If you are not experienced and the commitment is significant, usually yes. Understand how they are paid, because a share of the landlord's commission still ties their income to you signing something.
Can I negotiate without an agent at all?
Yes, and small occupiers do it constantly. What you cannot skip is the lawyer, because the document is where the money is.
How much legal review is enough?
Enough that somebody who practices in that state has read the whole document, including the guarantee and any work letter. Reading half a lease is close to reading none of it.
When should the building consultant be involved?
Before you accept any repair obligation, and before you agree the delivery condition. Afterwards their report is a description of a problem you already own.
