In this article, we’re exploring the role with the ‘flow of money’ and thinking about whether the landlord’s or the leasee’s desires are put first as a result.
In a commercial property circumstance, the ‘flow of money’ refers to the payment of a renting agent by a property manager for securing any lease. While this is typical practice in the property sector, that raises the question associated with whether this inducement (the commission) contributes to the actions of the realtor unduly favouring either the owner or the leasee.
Do you know the flow of money?
A landlord will engage a leasing agent to secure a hire deal; in return, the agent will be paid a commission-based fee. This is called the flow of money (or perhaps flow of commission). The actual tenant, meanwhile, will be required to deal with the actual leasing agent in order to obtain the lease.
Does the flow of money favour the owner or the leasee?
The question of whether a renting agent is ultimately performing in the best interest from the leasee or landlord is a complex and sensitive one. Understandably, the character of the lease or perhaps engagement with the property manager will affect the character of the proceedings.
As an example, if a commercial actuel is seeking long-term surety for business, they may take part in a lease expression of 3, 5 or 10 years. For the leasing agent, this means any potential income arising from the particular transaction will only happen at these relatively long intervals. This can impact any help the agent stands to get from the transaction, particularly when this is the only property they are representing because of this landlord.
On the other hand, if a leasing agent is which represents a landlord around multiple properties, there is the potential to gain multiple fees within the same period. This increased incentive could potentially influence the actions of the realtor, who may work strategically in order to increase their earnings.
Some agents will provide impartial information in order to facilitate a fair deal for all celebrations, the fact remains that the info an agent discloses to some potential leasee is up to their particular discretion. This officially means that the tenant or landlord could finish up being disadvantaged if the pull of commission swings the particular favour in the other direction.
Brokers vs CRES - that they favour and who pays?
It’s furthermore worth considering the role of broker commissions and company real estate services (CRES), which can work in the favour of either the owner or the property occupier.
Brokers respond to behalf of the landlord. They are paid the commission when they are been shown to be the “effective cause” of the hire transaction, e.g. by providing an approved offer and a signed lease. The broker’s commission is added to the cost of the tenant’s lease rental and amortised over the cost of the actual lease - therefore essentially, the tenant pays the commission.
CRES providers represent the interests of the occupier with the properties (the actuel or the owner-occupier). Their understanding commercial property may benefit customers by helping them save money on rental and home expenses, and minimising risk through helping with strategic home decisions. CRES providers are typically paid by the get together whose interests they represent and are not generally paid from the property funds.
How can impartial Property Reviewed aid level out the arena?
As discussed above, the current flow of money program creates a ‘loophole’ which means, sometimes, a potential tenant may not receive the complete picture in regards to a commercial property, together with certain pieces of information remaining undisclosed. This leaves the actual leasee at a distinct drawback when making a decision over a commercial property.
Through providing an online platform in which lets former and current tenants abandon unbiased reviews about a property, we aim to close this distance and bring much-needed transparency towards the commercial property business.
Future tenants reap the benefits of clear and available information about the property, whilst property owners and managers gain access to valuable house analytics and informative feedback about their area.