Glossary / Commissions and splits
Also known as: Listing contract, exclusive brokerage agreement
A listing agreement is the contract in which a property owner hires a broker to market a property for sale or lease. In commercial leasing it sets the broker's exclusivity, term, commission schedule, how outside brokers are paid, and when the commission is due.
Wikipedia defines a listing contract as an agreement "granting the broker the authority to act as the owner's agent." It describes three main types: exclusive right, exclusive agency, and open listing. The New York City Bar's model office brokerage agreement shows what a commercial leasing version covers: it appoints the broker as the landlord's exclusive broker, sets a term, calculates the commission on base rent using a schedule, leaves a blank for the payment date or installments, and sets out how outside brokers are paid.
The type of listing decides whether you are paid when the owner finds the tenant. Under an exclusive right agreement, Wikipedia says a commission is owed "even if the seller finds the buyer him/herself," while under exclusive agency it is not. Under an open listing, Wikipedia says the owner pays only the brokerage that brings the buyer, so several brokers can compete for the same fee.
Other clauses decide whether and when you collect. The NYC Bar model includes a protection period after expiration for prospects on a pending list, requires a buyer of the building to assume the commission obligation in writing, and pays commissions on renewals and expansions on the agreement's terms. It also limits the broker to the landlord's interest in the building for recovery. Attorney James Hochman, writing in the SIOR Report, recommends protection for foreclosure and eminent domain, warning that without it "your chances of recovery are slim."
Read the listing type, the payment trigger, the tail period, and the sale clause before you start marketing the space.
