Glossary / Commissions and splits
Also known as: Tenant rep, tenant broker
Tenant representation is when a broker works for the tenant, not the landlord, helping a business find space, compare options, and negotiate lease terms. The tenant rep broker is usually paid out of the leasing commission the landlord pays, as set by the commission agreement.
A tenant representation broker is, in the words of Goodale & Barbieri, "a real estate professional who works exclusively for tenants." The tenant rep finds and analyzes space, including space not openly marketed, and negotiates the lease on the tenant's behalf. Prophia describes the job as learning the client's location preferences, space requirements, and budget, then running market analysis on rents.
Even though the broker works for the tenant, the money usually comes from the landlord's side. Aquila Commercial writes that tenant rep commissions are "typically" paid by the landlord, and Metro Manhattan says the same for New York office leases, where "the landlord almost always pays them." Wikipedia's leasing commission entry describes the common structure: the landlord pays the listing broker, who then shares the fee with the tenant's broker.
As a tenant rep, your fee depends on two documents you may not control: the landlord's listing agreement and any Commission agreement the landlord signs with you. How much you receive depends on the split between listing and cooperating brokers set in those agreements, and on your own Commission split with your brokerage.
Timing is also outside your hands. The commission is usually triggered by lease events such as Lease execution, tenant Occupancy, or rent commencement, depending on the agreement. Wikipedia lists execution, rent commencement, and installments across execution and occupancy as common payment points. Where the fee passes through the listing broker first, you may wait for that broker to receive and redistribute it.
Before your tenant signs, get the landlord's commission commitment to you in writing, including the amount, the payer, and the payment trigger dates.
