Don’t do it unless you have to. I’m thankful that I don’t have to be politically correct and I can speak my mind as a business owner and a commercial broker in the market right now. These provisions have put more people out of business and I care to count and must be understood carefully before moving forward. Join us as we discuss the personal guarantee clause in commercial leases.
In this episode we discuss the process that you should take when setting up a tour for you and your company to view space. This process has been extremely effective for us and we believe it will work for you as well to save you lots of time and frustration.
Our philosophy is that you should only sign a lease for a term that allows you the maximum value in the way of concessions and rental rate. I can’t tell you how many attorneys I have spoken to that recommend to their clients to sign a one-year lease. I think this philosophy is not only foolish but detrimental to creating a contract that allows the business to grow and thrive.
In this podcast we go into great detail and covering all of the data points that you would need in order to make sure that you’re getting the best deal possible on your next lease. We also show you how to use that data and work with your broker to produce the best results.
Scenario #4: You got a proposal from the Landlord, you want to get the best deal but you are scared that if you use a broker that your rent will increase. What do you do?
In order to address this, it helps to understand how brokers operate and how they get paid.
Over 85% of Commercial Deals in Commercial Real Estate involve the use of a Landlord or Listing Broker
In the Listing Broker’s Agreement, there is Commissions set aside for BOTH the Landlord and the Tenant Broker (Which in Texas and most other places 6% of the total rent)
If the Tenant chooses not to use a broker, the Landlord Broker in some cases doubles the commission they make on the deal
If the Tenant chooses to use a broker then the Landlord Broker and Tenant Broker split the available commission
Tenant brokers do not charge the Tenant for commission, they usually ask for a letter to prove they are in fact the designated broker so they can get the commission agreement from the landlord.
If the Landlord were to actually charge the tenant for commission, what would this cost? Just take your monthly rent and calculate 2% to 4% of that number and there is your hypothetical commission. So if you pay $1,000 a month in rent and the landlord says that your rent will go up because you used a broker then they are “threatening” a $20 a month increase in rent.
If you were to use a broker, what would you stand to gain?
Market Report showing all of your options
5-10 Year Rental History of the Building
List of All the concessions that are reasonable in the market
Knowlege of the Business Points of a lease:
• When a Personal Guarantee is necesssary versus when it isn’t
• When the landlord or tenant should be responsible for buildout
• Can identify which lease provisions are unusual for the market
• Identify which expenses to cap
• Help the tenant pick which early termination clauses are reasonable
• Negotiate the ability to expand, contract, and sublease the property if needed
• Has attorneys to give a legal review of the lease
What are the financial benefits from using a broker:
Let’s use facts from my own deals:
In 2018, our firm averaged 15% decrease in total rent or greater in Houston below the market. Our best work we cut over 25% of the rent cost saving this particular tenant over $125,000 dollars. So if you look at the numbers, really look at the numbers... take the worst case scenario where the landlord just flat out charges you for your broker’s commission you stand to gain more than 10 times that easily by the time the deal is done and that is not including the time and effort that you will save by not having to do this process yourself. I hope that did not sound like a commercial, I tried to be real, I made this podcast because I know that this is an area that tenants are really concerned about. Did I convince you to not be afraid to get the help that you need? Let me know in the comments if I need to do a podcast on how to pick the best brokers (because they are not all created equal)
Looking for a space for your business can be a time and resources consuming task. Here is the best way to search for the best space at the best price for your business. Get your notepad ready and lets do this!
This inaugural episode details how professionals estimate how many square feet they need to operate any commercial space. Whether it’s office, industrial, or retail space, you will find Tipps here that would help you to get just enough space but not too much!