Looking for opinions on terms for a single-owner commercial broker leasing contract for a medical building
I'm looking for some crowd input in regards to negotiating a commercial brokerage contract for leasing a single tenant medical building. Building value is roughly 4mm.

My current tenant is not renewing their triple net lease and is leaving in 6 months. The broker wants me to pay a 6 percent commission on the total rent paid over the term of the new lease and any options to renew, for a period of 10 years. If new tenant does not have a broker, the commission I pay my broker would be reduced to 4.5%. Half of the commission is due at lease signing, the remainder is due when rent begins. If the property is sold during the 10-year period, the broker wants a 4% sales commission.

What are reasonable terms for a commercial broker and owner agreement? Are these terms in line with normal expectations? The 10 year term in particular seems hard to stomach.
[{"id": "i0f9hcd", "text": "That is pretty market standard.  You could counter at 5% and 3.5%...See what he says.   Commission payout timeline is appropriate.  You certainly do not have to give him building sale commission, or even have that included.  Maybe negotiate and say, if you take a cut on the commission for leasing up the building, do a good job and find me a solid tenant.  Then maybe you can be the listing broker if I ever sell it. Where are you located roughly?", "replies": [{"id": "i0fvi5v", "text": "Thanks, I'll try and work on the sale commission terms. Located in a hot midsized market with companies and people moving in, so the prospective industries that can use the building are healthy.", "replies": [], "depth": 2}, {"id": "i0geccg", "text": "Your broker should definitely not get an automatic commission if the building sells. If he won\u2019t agree to deleting the sales carve out completely and you still want to use him for whatever reason, then the language should be changed to say that they will earn a commission on building sale only if actively involved in procuring the winning bidder and/or selected to be the listing agent pursuant to a separate agreement with a market %.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i0g0kqq", "text": "Drop the sale commission entirely. He\u2019s being greedy. The leasing fees are in line with what I see in my midsized Midwest market.", "replies": [], "depth": 1}, {"id": "i0htobn", "text": "My post will receive much hate from brokers:\n\n1. Never agree to ten year terms unless it's from a credit Tenant and the rent is corporate guaranteed.  There is no - no - reason a Tenant needs a straight ten year term and that includes credit Tenants.  I Just ratified a lease with Nike.  It's a five year term with two five year options.\n2. Brokers are the ones who created \"ten year terms\" so they can get paid more commission.  A five year term with a five year option is literally the same as long as the Tenant is not in default of their lease.  But, it offers both the Landlord and Tenant an out after five years.  This is a benefit to both parties.\n3. Commission is negotiable.  I just ratified a lease with a broker from CBRE for 3% for the initial term.  Rent rate is $78/sqft  Commission is negotiable.  I would never pay 6% to a broker.\n\nWithout knowing more of your situation your LOI terms could be:\n\n1. One (1) five (5) year term with one (1) five (5) year option executable by Tenant 270 days from lease expiration date.  Tenant must not have a default on record, otherwise option is void.\n2. 3% annual increase.\n3. NNN lease.\n4. Space leased \"as is\".\n5. Personal guarantee or a rolling guarantee required (pending financials).\n\nIn a separate agreement pay the broker 3% on the five years.  If they push pay 1.5% on the option if executed.  That's it.  The broker has nothing to do with the sale of the property.  In this situation it seems the broker is attempting to take advantage of you.  I have nearly 100 properties in the DC area and this scenario would never exist.  Any broker who tried to pull these ridiculous terms on my company would be blacklisted (and we have a list of brokers we refuse to work with due to prior behavior).", "replies": [{"id": "i0i7bgb", "text": "Thanks. It's helpful to see hard examples from the \"favorable terms\" end of the spectrum. You're basically spot on with the gleaned terms as well.\n\nTakeaway is that the sale commission needs to go and percentage is coming down. The suggestion to concentrate some negotiation on the 5 year option cut is helpful as well. That's why I made the post, to map out a spectrum and see where the push/pull usually takes place.", "replies": [{"id": "i0ige64", "text": "Yes, the broker has nothing to do with the sale of your property.  Attempting to steal a commission from a sale he has no relation to is unethical.  Also, you can negotiate down to 4% commission.  I'm in Washington DC where properties lease for $100-$200/sqft.  In 30 years I've never heard of Landlord paying 6% to a broker.  4% tops and perhaps 4.5% if they did an excellent job in negotiating the deal.  However, most experienced Landlords perform most of the negotiations once the Tenant signs the LOI.", "replies": [], "depth": 3}], "depth": 2}, {"id": "i0juo68", "text": "I\u2019m a broker and I don\u2019t like your answer, but I think for a different reason than you expect. It\u2019s not commission preservation, it\u2019s just you\u2019re giving advice which is really specific to your situations you\u2019ve been in or are in and presenting it as law.\n\n1. As an experienced landlord you should know, options are almost always to the absolute benefit of the tenant. A ten year term, depending on this landlord\u2019s goals, could be extremely helpful - even if not to a national credit tenant. In today\u2019s capital market frenzy it is not uncommon to see local/regional credit on 10-15 year terms fetching aggressive cap rates. If he wants to sell or refinance, this may be a benefit to him. The value of a property with a five year lease versus a ten year lease is not the same. \n2. I also find it laughable brokers invented this when there is a vast amount of developers and landlords doing 10 and 15 year deals direct all over the US right now with zero broker involvement. Do you really think brokers are more powerful than simple economics and the only reason these terms exist is to pad pockets?\n3. Commission is negotiable. In your market, where you are achieving nearly triple-digit rents of course you will never pay 6%. You have zero clue what this landlord\u2019s market rents may be. If he\u2019s in a market in which base rents are $20s-$40s than a 6% total fee with a 4.5% in house discount would be totally warranted. If he puffs out his chest and tells everyone 3% no one will list his property and he\u2019ll alienate himself (or end up with a discount/resi broker). You also sound like you just paid a tenant rep 3%, he is discussing listing. @fade_dance, that being said the sale commission section is sketchy, unless you\u2019ve discussed selling the product with him and that\u2019s where he\u2019s coming from. If that\u2019s out of nowhere than red flag!\n\nLastly, depending on his situation it may greatly benefit him to provide incentives as opposed to an as-is deal. Perhaps it bumps his base rent and that\u2019s more important to him?\n\nSeems like you\u2019ve been around this industry a long time, but you need to stop presenting your knowledge as if it\u2019s the law across all markets and situations (like the flat out wrong tenant-rep commission position in that other thread). Your absolute answer in this situation, if taken at face value by this not as experienced landlord, could really negatively impact him and that\u2019s not what we are here for.", "replies": [{"id": "i0kbv95", "text": "I\u2019d agree with your points, esp regarding market commish in different markets. Commish is typically 6% of base rent only on a new deal, (4% to the tenant rep, 2% to the LL rep, if no tenant rep, the 4% to LL Rep). And 4% on a lease renewal (2% tenant rep &amp; 2% LL Rep). \n\nExceptions include austin office, Atlanta industrial, and Milwaukee industrial among others\u2026\n\nI underwrite properties all over the nation. There are exceptions to this rule but it\u2019s pretty fair. Call some leasing brokers nearby and ask them about market rates for your property and market rates for leasing commissions, average TIs, avg lease term, etc.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]