Looking for a place? What should be included in the agreement on the representation of residents? – Press Telegram
I am pleased to announce that last week we were tasked with representing a lively logistics company in search of a new warehouse location.
Sure, they can recover at their current address, but it will all be included in the mix of our process.
So how did we win the deal? Other than my charismatic personality and dashing appearance, I have no idea. But I declined. We were told that our thoroughness in understanding their situation, our plan and the way we focused on them were key. Really owner-oriented!
An engagement agreement has been made. The points of the said understanding I considered worthy of the column. So that’s it …
Time frame. Usually we base our exclusive engagement agreements for a six-month period. Of course, this may be different, but we found that in this environment it takes more time to notify the market and the search process, so it takes a few more months. In some cases, rental negotiations can take weeks, and this needs to be included in a timely manner.
Description of the requirement. The final definition of the requirement is what is in the tenant’s interest as determined by the tenant. However, there are some common parameters of the sought-after alternative that we incorporate into our agreements. Things like total square footage, office space within square feet, net warehouse height, sprinkler calculation, truck turning radius, and, if important, things like electricity in the building, storage of trailers, off-stage and fenced yards.
Location. We start with a zero base, which is an existing place, and build from there. In our experience, some tenants want to stay very close to an existing location because of the staff, suppliers, proximity to the freeway and general familiarity with the surrounding amenities. In other cases, the tenant may want to look at markets far outside their existing location, including outside the state. In this assignment, we will focus on Orange County, the Inner Empire and possibly one place outside the state that has not yet been determined. It could potentially be Arizona, Nevada or Texas.
Rate and timing. They are difficult to identify because nowadays there is such a big difference in the motivation of the owner, and therefore rental rates and expectations on terms vary. Most tenants have a general idea of the term of the lease they are willing to meet. It can be as much as three years or as much as 10. So we write in general terms.
What we are authorized to do and what not to do. Our agreements stipulate that we must inform the market of the requirement – make sure the tenant’s name is anonymous, look for available inventory both vacant and occupied, check these alternatives for suitability, visit the tenant, make suggestions on behalf of the tenant and join negotiate with the landlord. Obviously, we do not have the right to bind the tenant in the lease. We also should not disclose the name of the tenant unless they say so.
Emergency hatch. Since most of our commitments are related to the first assignment, we include the option for the client to terminate the contract after a certain period of time by giving us written notice. We are careful to note that any building in which negotiations have taken place is excluded from future brokerage transactions for a certain period of time. This is called the exclusivity period or “tail”. They can range from 30-180 days.
Tenant expectations. As part of our partnership, we ask the tenant to allow us to be a hub for sharing all information. If they get a statement from another broker or hear about building on cocktails, we ask them to pass it on to us for consideration. In addition, the tenant is required to inform the landlord that they have selected an agent to consider alternatives to the market. If an aggressive landlord contacts our tenant directly – with a view to evicting us – we ask our tenant to support us and inform the landlord that we are engaged in representing their interests.
Transaction changes. There are often changes in the requirements described. For example, some residents begin to be tenants and become buyers. In some cases, their existing location becomes the best alternative for them. Finally, some places are not initially considered and then enjoyed. All of these modifications need to be invested in understanding.
So why should a resident sign exclusive contracts with a broker? After all, it’s a little different than putting your building up for sale or renting out while waiting for a broker’s prospects. Isn’t it more profitable – as an occupier – to have several agents searching on your behalf? These are all questions that arise.
The simplest explanation is that it costs the tenant nothing to bring in a broker to search solely on their behalf. The property owner is responsible for any commissions, so you benefit from the broker’s experience and eliminate the need to have multiple points of contact when searching.
Alain S. Buchanan, SIOR, is a director of Lee & Associates Commercial Real Estate Services in Orange. You can contact him at firstname.lastname@example.org or 714.564.7104.