Management Fees for early lease termination buyout
I manage a 12,000 square-foot multi tenant office building. One of the tenants signed a five-year lease with no early termination clause.
The business did not go well, and after 10 months, they asked if they could terminate the lease early. For the owner I helped them negotiate a lease buyout equal to two years of rent and CAM. 
Should I be paid my full management fee out of the lease buyout they received?
[{"id": "iphsm0d", "text": "In my experience when there IS a termination clause the language usually stipulates that part of the termination fee is to be unamortized brokers commissions paid, unamortized TI, etc. On the brokerage side our fee is paid up front for the entire term and there is language in the lease to clearly state that the landlord will be reimbursed for those unamortized fees. That way the landlord isn\u2019t out money and the brokers don\u2019t have to return money for work completed. I don\u2019t know how your management fees are paid, but if they are a monthly or annual fee, I would suspect your best case would be arguing for a proportionate amount of the fee. I can\u2019t imagine you could successfully argue that you\u2019re entitled to 5 years worth of management fees for doing 10 months of management work.\n\nI.e. if your management fee was 10% (I\u2019m using random easy numbers for discussion purposes) of gross rent each month and the Buyout is based on 2 years or 24 months. You could suggest getting 10% of 2 years worth of gross rent.\n\nI think the more important question would be what does your management agreement say? I would assume an issue as common as this would be addressed in the agreement, but if not it\u2019ll likely just be up to your negotiating skills.", "replies": [{"id": "iphtdm1", "text": "I appreciate the thoughtful response. So I\u2019m working with/for a family member and we don\u2019t have a written contract for management.  It\u2019s not contentious at all and they just want to follow \u2018common\u2019 practice in a situation like this. If a management contracts normally cover this and they normally pay / or don\u2019t pay the management fee out of the settlement then we\u2019re both fine with it either way.", "replies": [{"id": "iphxwbl", "text": "Big disclaimer: I\u2019m in the brokerage world and am NOT an expert in management so please seek advice of others as I was simply trying to provide some insight not give advice.\n\nI don\u2019t know what is standard in your area, however you could call a reputable management company and ask how their fees are structured, or speak with other experts. I don\u2019t want to send you in the wrong direction so please view my comment as food for thought only!", "replies": [], "depth": 3}, {"id": "iphziah", "text": "I\u2019m my property management experience, I\u2019ve personally never heard of being paid management fees that would be due in the future but are lost because a tenant vacated early.\n\nWe\u2019ve had plenty of tenants fail/break leases/etc., but have never been paid for what income \u201cshould\u201d have been, just what the actual income/agreement is.\n\nIf you are now managing a vacant building for them, I would just recommend working out some minimum basic monthly fee for your basic management service while empty until a new tenant comes in. Sounds like you and the owner are on good terms, and should be able to figure something out. There is still some time/work involved in taking care of an empty building.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iphyqej", "text": "assuming 'management' = property management, you as a PM, would not get paid any fee for handling the early termination.  you're at the mercy of the landlord to recognize your role/contribution in handling this and compensate you one way or another.\n\nas anacott27 mentioned, termination clause or agreement usually has language pertaining to reimbursement of unamortized TI/LC.  However, if a TT needs to terminate so early as you mentioned, generally, it's because TT is in dire straits and can't cover 100% of true unamortized costs...in most cases the total termination fee gets negotiated downward from the actual calculated amount.\n\nif you were the leasing agent who brought this TT in and now you want are looking for a fee for negotiating early termination, as the LL, I'd be pissed (even though as a LL, I had the option of passing on this TT).\n\nit's probably best to put in place a property management agreement and a separate property leasing agreement.  as my parents drilled into my brain, you must be prepared to lose your friend/family if you decide to conduct business with them.", "replies": [], "depth": 1}, {"id": "ipk7yt5", "text": "Nope.", "replies": [], "depth": 1}, {"id": "ipk9d53", "text": "I would look at it this way - if your agreement (handshake or otherwise) is going to continue on beyond this particular tenant vacating their space, and that space is going to get re-leased, then you are going to eventually replace the gross income on that suite that will then increase your PM fees again.\n\nIf you had taken on PM for the property and 1 or 2 suites of a multi tenant building were vacant you would most likely not be collecting a PM fee monthly for those suites in addition to your fee on gross collections from the other suites, but when they leased, your fee would increase because collections increased.\n\nIMO, I wouldn\u2019t try to connect your negotiation of an early termination to your property management activities - if you and the owner feel that a fee for that specific negotiation is warranted then figure that out, but I wouldn\u2019t try to collect future PM earnings on a space that you\u2019re ultimately going to collect contractual earnings on again.\n\nDisclaimer: my personal experience and daily existence is on the brokerage &amp; leasing side, but our family company owns, leases and manages our own multi-tenant office/retail/industrial &amp; multifamily properties in addition to 3rd party properties that we lease and manage.", "replies": [{"id": "ipk9xvt", "text": "Follow up - I would really only suggest considering a fee for negotiating the early termination penalty if there was NOT a real estate commission paid when the lease was executed. Otherwise we get into what was mentioned elsewhere, where the LL already paid a full fee for a 5 year lease and only ended up getting about 3 years of the actual revenue - asking for more could easily put everyone in a tough spot.\n\nIf you do feel like a few is due, I personally wouldn\u2019t feel comfortable asking for more than maybe 2% of the total payment - a pretty typical renewal commission (even though this isn\u2019t a renewal, it\u2019s captive, existing business so I feel like it falls into that category). Just my 2 cents, hopefully it helps.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ippymdw", "text": "No fees. But maybe negotiate a higher fee for being in a replacement tenant quickly.", "replies": [], "depth": 1}, {"id": "irgtbhb", "text": "In my market (VA), fees are a function of revenue and an early termination fee is absolutely revenue.", "replies": [], "depth": 1}]