8 Reasons Not To Allow A Landlord Rep To Negotiate Your Lease Document

Presented By Mark Rauch 

"If there is such a thing as good leadership, it is to give a good example" -Ingvar Kamprand-

Landlord brokers by and large do a decent job representing landlords.  That's what they are hired to do.  But you shouldn't be surprised to hear that the guidance landlord brokers are accustomed to offer doesn't serve your interests as a tenant. 

Here are 8 reasons office tenants should stay away from landlord reps:

1) "Landlord brokers know the market. No one better to negotiate your lease than me"

Substandard leases occur because few brokers know the art of driving lease rates down and concessions up. They don't insist on sufficient performance standards for landlord's in such areas as heating, ventilating, air conditioning, electricity and other services. They don't negotiate enough operating expense exclusions. Costs for various items in the lease can escalate way above those anticipated based upon how the lease was negotiated.  A poorly negotiated lease frequently turns a great space into a nightmare transaction. 

2) "We can get you a great deal because we have a relationship with the landlord"

If your financially able to meet your lease obligations, then any landlord would love to have you in their building.  The idea that you need some kind of "in" to lease space is absurd.

What tenants require is an advocate who will represent their interests and not the interests of a landlord with whom they already have a relationship or hope to build one.  

When a broker tells you they have a relationship with the landlord, ask yourself whether such a relationship is in your best interest.  Do you think a landlord broker will really negotiate aggressively enough on your behalf? Why would they if it means challenging a landlord they hope to get a listing from or who they already have a listing with? 

Landlords tend to negotiate with a tenant rep beyond what they normally would with a landlord broker.

3) "We have a lot of branch offices"

If you don't require space in another state then having Branch offices makes no difference. If you do require an office in another state than Branch offices will not enhance a brokers ability to identify spaces. This is because landlords list their available space  through brokerage networks and databases. Landlords want everybody to know about what they have so they can start getting revenue as quickly as possible.

Great lease analysis, lease negotiation and follow-up are the ingredients needed to negotiate an awesome lease transaction, not the location or amount of offices (Cresa has over 60 offices nationwide and globally).

4) "Don't upset the landlord"

Landlord brokers often advise tenants not to negotiate aggressively, not to demand that landlords comply with lease terms and not to insist on the rights provided in the tenant's lease.  

The reality is that landlords usually respect tenants who know their rights and pursue their interests in a business-like manner. After all, the landlord needs their tenants and wants to keep them happy and satisfied. It's cheaper than losing them and incurring the cost of replacing them. 

5) "Hurry up and get the deal done"

Landlord brokers push tenants to get transactions done fast which is not being prudent.  They will tell tenants that multiple tenants are negotiating on the space and somebody else will take it. A Tenant Rep will locate multiple spaces that are a great fit so such pressure is unnecessary and the focus can be getting the best economic transaction.  

Rushing into a real estate deal jeopardizes comprehensive due diligence and proper lease review which will be a major liability to the health of your company.

6) "You are a big tenant and have very few alternatives" 

Terrible leases have been signed by big companies because the executive brass felt they had to be in a particular building.

The number of large spaces in a particular area are limited at any point in time however this does not mean big tenants must agree to whatever terms landlords care to offer.

Big tenants must gain every possible advantage.  It's critically important for a large space user to start the site search early. A ten floor tenant should start at least three years before lease expiration.  Starting early means you'll be able to see more spaces in addition to build to suit and purchasing options. There are almost always more alternatives for large space users than you might imagine, including existing buildings in the same area that can be repositioned and buildings in a different area once considered hands off.

7) "The draft lease is boilerplate with standard terms" 

So-called "Standard Terms" translates to landlord centric terms. Leases are drafted by landlords that of course want to protect their interests. The lease will often include operating expense loopholes, mark-ups, a lack of tenant protections, vague landlord performance standards and no audit rights.

Lease negotiations must be driven by your business objectives, not by a landlord's desire to avoid risk. 

8) "Focus on the rent and workletter"  

Many executives assume they have locked in their biggest costs by coming to an agreement on these two items nevertheless the remainder of the lease is loaded with costs.  There easily are many noteworthy non-rent costs in a typical lease such as operating expenses, taxes, water, sprinkler, electricity, security deposits, late charges, insurance premiums, repairs, security services, fees and expenses incurred by Landlord as a result of instituting, prosecuting, or defending any action etc.

It is contrary to the interests of the landlord broker to identify these costs or do anything else that might jeopardize a deal.

Summary

Largely, the most common reason tenants take bad advice from landlord brokers is because they are awed by the "big deals" some of these brokers have done.  Big deals (and small deals) are meaningless unless they are good deals for tenants.  A substantial number of leases have serious problems.

When you're interviewing a broker don't focus on what deals a firm has done but about how a firm has protected its tenant clients.  You want to know how the broker analyzes sites, evaluates landlords, negotiates leases, negotiates other kinds of real estate transactions, monitors build-outs, audits billings and in other ways protects tenants.  

Please contact me to discuss your office space needs.

Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document.