Should I use a tenant broker?
Hello,

Small background. I am opening an independently owned, franchise location in a local shopping plaza.

I have dealt with real estate in the past, managing a 15+ location company before but honestly we never used a broker!

Now I am negotiating my first lease for myself and I want to make sure the terms and the price are favorable (obviously). I started negotiation between myself and the broker for the landlord. I recently contacted a tenant broker and found out they would work and split the commission from the LL and it would essentially cost me $0. I've gotten to the point where I have an LOI and I'm making changes and sending back with a counter offer. I'd feel more comfortable if I had a broker so I could be sure I'm not forgetting anything or getting taken advantage of, even though I think I could complete negotiations on my own.

Here's my Q: is there anything wrong with starting to work now with a broker even though I'm halfway thru the negotiations? Could that potentially piss off the LL broker because he has to now split commissions?

Thanks for any advice.
[{"id": "db73d2s", "text": "Hire a local real estate attorney who knows the market. They can advise on deal terms and review your lease. You pay a few more bucks but it's worth it and the LL and LL broker don't get upset. ", "replies": [{"id": "db74zar", "text": "So, to be clear, you're saying the LL Broker will be upset by my addition of a tenant broker? \n\nI really would rather use a broker than find and pay an attorney for obvious reason.", "replies": [{"id": "db755a6", "text": "It would be rude, but not uncommon to show up now with representation. I kind of agree with the lawyer idea. This way he can review the lease and cross out any unfavorable language. The tenant rep broker is more interested in getting the deal done than reviewing the lease line by line. ", "replies": [{"id": "db75jbi", "text": "I really appreciate both of your responses. \n\nI'm still considering using a broker because this deal isn't a done deal. I don't have a lease and I haven't even sent back a counter-offer via LOI to the broker. I don't know the market well enough to adequately make sure I'm not getting fucked. \n\nDo you think my rudeness by showing up now with a broker would hurt the deal or not affect the deal, just piss of the LL broker?", "replies": [{"id": "db78s78", "text": "Absolutely use a tenant rep brokers, it's what they are for. Competent LL's underwrite broker fees into their deals. If the LL broker is pissed because you are bringing someone and doing your homework, I would consider that unprofessional. If you are guarenteeing the lease, use all the resources you can.", "replies": [], "depth": 5}, {"id": "db79ao6", "text": "Probably just piss the broker off. Put yourself in his shoes, he showed the space, talked you through rates, and is now going through the negotiating process, all thinking he's going to make both ends. Now your going to show up and demand half his payment for doing a majority of the work? At the same time, I wouldn't blame you for seeking representation. That said, if you don't have representation than the landlords broker is technically your rep as well. ", "replies": [], "depth": 5}, {"id": "db79ax8", "text": "If you have handled all interactions with the landlord's Broker up until now and haven't referenced having a broker or agent of your own then the landlord's agent cool be a bit upset. In their mind they were going to receive a full commission and now they would have to settle for half. That said, it happens from time to time and as a broker you just learn to deal with it. How it would impact your negotiations on the property would probably be a bit unclear... The landlord's agent may encourage the landlord to take a more aggressive stance in negotiations or they may just accepted as part of the business and move forward in the process.\n\nOut of curiosity , what added value do you expect your tenant rep to bring to the table? Can you ask the landlord rep for the same items? Realistically, you need comps for similar properties and other currently available properties the judge to see where you fall in the market. Is it unrealistic to just ask the landlord's rep for those?\n\nAlternately, if you are uncomfortable bringing someone in late you can always offer to pay the tenant reps Commission your self. You can probably even offer to pay them a flat amount to assist you in the transaction.", "replies": [{"id": "db79zy3", "text": "He did not even turn around the LOI yet. Furthermore, even though he could just ask the LL Rep for whatever items he needs, the point is that he doesn't know WHAT he needs to ask for.", "replies": [{"id": "db7g5r2", "text": "I guess I should clarify a bit , conventional wisdom would be to always use a tenant broker that is specifically looking after your interests. They have a fiduciary obligation to make sure that your needs are best served. If the question that is being asked it should I use a tenant rep broker then the answer would be generally yes. \n\nFrom my understanding there was concern over how it would be perceived by bringing in a tenant rep broker at this stage of the game. In this case, depending on the landlord rep, it could have some collateral impact on the negotiations. It shouldn't , but that doesn't mean it won't.\n\nOne thing I have noticed and I myself have even been guilty of is the general advice here is to always get a tenant rep. This falsely assumes that all brokers are equally competent and from my experience that isn't necessarily the case. I would modify my suggestion for representation slightly and state that you should get the broker that you feel most comfortable with to represent you. If the OP has concerns about the landlord's rep and their ability to treat the OP fairly then that would trigger my recommendation for finding a tenant rep guy.", "replies": [{"id": "db7gkwr", "text": "Wow - thanks for the great replies with great info. \n\nCouple things - 1. LL Broker seems to be fairly positioned and has even said things like the LL wants to get this filled, LL will probably budge on length and price per sq ft he'll probably accept $0.50 lower. He also let me know that he could find other places for me that other LL own if I am looking to open more than 1 location. So he \"seems\" to be on my side.\n\nI did not find enough comparables in the area to know the going rate per sq ft and terms in general. This also is because I am not a CRE pro, I have negotiated in the past but when it is your own business' first location on the line you are a little more concerned about the details. \n\nBefore the last response I was leaning towards being up front with the LL broker and saying I'm looking for some comparables in the area to make sure it's a fair price and fair terms. I'm slightly worried about things I wouldn't typically think of like my potential broker had mentioned having the CAM increases capped at 3%, I wouldn't even have known enough to negotiate that type of deal just because I'm not familiar with real estate. \n\nSide note: unique situation as well as the franchising company had this specific plaza located as a \"pre-approved\" area. Now, I could go and find another area near there but the approval process is longer. I was smart enough NOT to mention this to the broker so far.\n\nSo game plan - I'll probably just call the LL broker tomorrow and tell him I was thinking of getting a tenant broker but if he could help and find some comparables in the area and show me this is a good deal then I would be okay with negotiating myself. Does that sound reasonable?\n\nThanks again for all the input!!! Really appreciated. ", "replies": [{"id": "db7gp3d", "text": "Actually re-reading what WheresRet wrote and that was kind of my point. Shouldn't I get a tenant rep if I didn't know to ask for capped CAM? What other terms could I be mistakenly overlooking in the landlords favor? And I can't just ask the LL broker to be honest and point them out. Conflict of interest. ", "replies": [{"id": "db7i0da", "text": "You certainly can ask the landlord's broker to point that stuff out.\n\nUltimately it's probably more of a judgement call on the ethics or integrity of the landlords rep vs going and finding a tenant rep. In a perfect world the landlord's rep could respond and say, \"sure glad to help here's the number of items that I typically include when I'm representing a tenant.\" The question then becomes do you trust them? I don't think that I nor anyone else can answer that for you because it will largely be based on the feeling that you get from the landlord's agent. ", "replies": [], "depth": 10}, {"id": "db7i20z", "text": "I still think a lawyer helps with this stuff a lot more. That's my personal experience. Some brokers are worth every penny and some lawyers ruin deals...", "replies": [], "depth": 10}, {"id": "db7igob", "text": "Kind of. Generally speaking having a tenant rep from the start is the way to go, but since you're already into it, go with what others suggested and hire a competent Real Estate attorney to help you through particulars-they will know things like capping op ex, which only works on controllable op ex, not payments to insurance, taxes and some aspects to maintenance. I say this b/c the amount of $$$ involved for all parties is relatively small-I saw economic terms of this proposed deal that you posted in another forum-Engage a tenant rep on your next deal, about a year out from when you want to open a second locale. My 2 cents as a tenant rep broker", "replies": [{"id": "db7jv67", "text": "Thanks. Believe it or not I was looking for a real estate consultant / attorney and filled a form on their website and that's how the potential tenant broker contacted me and let me know he could broker for me. \n\nAppreciate all the advice!", "replies": [], "depth": 11}], "depth": 10}, {"id": "db84jyf", "text": "Do not ask the LL broker for comparables. He will run comps and take out the lower rates, and keep in the high rates to bump average. Source: I was an analyst for a 'successful' LL team.\n\nGet a tenant rep broker! There is literally no reason not to other than pissing off the LL Rep. I still do not understand your hesitation, the LL Rep will get over it and if he is fair and professional there should be no issue. If he is not fair and professional, then he is probably shafting you as we speak.", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "db7n0m5", "text": "It's not rude to hire someone to look out for your interests exclusively.  LL only looking out for her client not you, technically.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "db7ehl6", "text": "LL broker here. It's obviously not ideal news to receive but it's part of the game. If it makes you more comfortable that's what matters. It's not about a broker's commission check when your money and business are the things at stake.\n\nI've had this happen before and in my opinion the best way to handle it is tell them yourself. It's aggravating just receiving an LOI from the new broker with no prior knowledge ", "replies": [], "depth": 1}, {"id": "db7myhk", "text": "Commercial real estate broker here... not an attorney an not legal advice...\n\nFirst, congrats on opening a new location!\n\nTenant Brokers fiduciary responsibilities will be to you if you have an agreement with them (assuming that's the setup under your state's real estate rules).  \n\nCommercial real estate brokers are commonly very specialized in their field.  For instance, their are landlord brokers and tenant brokers but they also tend to specialize in a particular geographic area or region and specific property types like office, retail, industrial... and in something like retail a tenant broker might specialize even further like into restaurants, C-Stores or gas stations, medical/dental uses, etc because each do have their own intricacies...\n\nNot all brokers are equal!  Don't think you can reach out to your neighborly residential agent and get good service on a commercial lease... two totally different beasts.\n\nLook for a tenant broker who specializes, look for no upfront fees or hourly rates (not to say their aren't tenant brokers worth every penny of what they charge up front or hourly i just don't think it's necessarily your situation... though your area may be different then mine on fee structures), look for one who has closed a tenant side deal in your category of retail (i.e. restaurant, medical, general retail)... look for one educated... I'm biased but CCIM designations are great and if was office or industrial I might say SIOR... once you find the right one, don't be afraid to sign an agreement with them but do your due diligence.\n\nget an attorney ALWAYS!!! The broker probably has a great suggestion for a few to talk with who are familiar with the area, perform a lot of commercial lease review, etc.  Literally every commercial lease that i've done in my 15+ years that didn't have legal counsel, the commercial tenant found themselves either screwed because of a sneaky clause or \"thought\" they had been screwed because they signed something without understanding it or misinterpreting the nature of a clause... not kidding, literally every commercial lease.\n\noh... and yeah a it's a little late on getting a tenant broker but it's your prerogative... let the tenant broker know your status before you unleash him and i would definitely let the LL broker know ahead of time too.", "replies": [{"id": "dbd8up4", "text": "this is great advice...a landlord's lease is almost always going to have language that can/will bite you in the ass down the road so you should have two sets of eyes in addition to your own on the LOI and the lease before you sign it...lawyer and your own broker...no exceptions....that being said, try to meet your landlord in person before closing and build a relationship outside of the brokers/attorneys...good landlords want their tenants to succeed and good tenants want a landlord who understands their business and can provide support (help with permits, support with approvals with the town) down the road...", "replies": [], "depth": 2}], "depth": 1}, {"id": "db7oaf3", "text": "I have a good friend that was a top tenant rep for a long time.  He used to love to brag about how much money he saved his clients or finding better properties that more strongly suited their needs.  As a business owner I look at people that don't use reps with the same sideways look that I have for people who want to represent themselves in court.  It's just a bad idea to not utilize experts if you have them at your disposal.  You don't know what you dont know.", "replies": [], "depth": 1}, {"id": "dd0ryuw", "text": "Hi All -\n\nUPDATE: I brought on a tenant broker and I'm glad I did but here are some issues I'd like your advice. \n\nI brought on my tenant broker last week in December. \n\nThe first entire week the LL broker was MIA. We didn't even get a chance to tell him I have a tenant broker. I personally wanted to be the first to do so and it was over a week before I could get a hold of him. I left him messages etc and he was MIA for a whole week. Looking back it seems he probably was upset and taking it out by going dark. \n\nThis guy has been terrible. We started negotiating, we send redlined LOI. LL broker OKs almost all of it. Wants price up. We agree to increased price. I sign LOI and send last week. \n\nLL broker doesn't respond. I follow up with my broker Monday asking where the signed copy of LOI is. He says he doesn't have it but he's been contacting LL broker and we should have it. \n\nBtw I have a deadline to have a signed lease by 1/31 to be in the franchise program in working on. \n\nMonday my LL broker does not get back to us at all. Calls - texts - emails from my broker to him, nothing. My brokers wife is also in CRE and she says the LL broker is representing a different property she is working with and he had been responding to her all day. Verification that he's being rude selectively to us. \n\nTuesday he comes back, says landlord changed his mind on stuff previously agreed to in LOI!!! Vanilla box portion - unreal. We counter with additional free rent and lowered per sq ft. \n\nNo response. I get on the phone yesterday AM and told my broker go back to original pride we agreed to. Agree to no VBox and ask for only 3 mo additional rent free and let's get this done contingent we can have a lease by Tuesday (1-31)\n\nLL broker no response again on Friday to any email call or text. So my offer isn't even in front of LL!!! And again my tenant Rep said his wife had been communicating with LL broker all day. \n\nIM AT A LOSS. IM ABOUT TO CALL LL DIRECTLY. I am literally willing to take the original deal in the LOI without the VBox if I can just get this done by Tuesday. The buildout program for my franchise must have a signed lease by 1/31, no exceptions. \n\nWhat can I do? Pls any advice would help. I understand how fast this turn around is for the lease but the LL and I are agreed on terms and the plaza has vacancies. This is not a top of he line plaza, he would want my franchise in there. \n\nThanks. ", "replies": [{"id": "iwtn9o7", "text": "There are some terrible CRE brokers out there and I say this as a CRE broker myself.\n\nAlot of the older generation CRE brokers don't utilize technology to make their work easier.", "replies": [], "depth": 2}], "depth": 1}]