Landlord Fee for Procuring Commercial Tenant Lease?
Working for developer which is both the GP and a member of the LP for a mixed-use development deal. We procured a lease for the asset/development without a broker. The question is- if the LP agrees to it, is there some legal or other reason why we couldn't take a fee for having procured the lease? We do not have a broker license...but does that matter? If the LP agrees there was a value in securing a lease above proforma (finding tenant, negotiating deal, guiding transaction, etc)., and if the LP agrees we should be compensated, can anyone think of a reason why we couldn't get a fee? Has anyone else seen something similar take place?
Based on the most helpful WSO content, the situation you're describing involves a developer acting in a capacity that typically might be filled by a broker, by securing a tenant lease without the involvement of a licensed broker. Here are some considerations:
Broker License Requirements: Generally, receiving a fee for leasing activities may require a broker's license, as this activity is often regulated by state real estate commissions. The requirement for a broker's license can depend on the state in which the property is located and the specific activities performed.
Partnership Agreement: If the general partner (GP) and limited partners (LPs) have an agreement that allows for such a fee to be paid to the GP for procuring a lease, and it's within the legal framework, then it might be permissible. It's essential to review the partnership agreement for any clauses related to this matter.
Legal and Tax Implications: There could be legal and tax implications for taking a fee for services typically performed by a licensed professional. It's advisable to consult with a real estate attorney and a tax advisor to understand any potential risks or liabilities.
Precedents: In some cases, developers may receive an incentive or fee for bringing in tenants, especially if it adds significant value to the property. However, this is typically outlined in the development or partnership agreement.
Value Added: If the lease secured is above the proforma expectations and adds considerable value to the development, the LPs might see the merit in compensating the GP for these efforts.
In summary, while there might not be a straightforward prohibition against receiving a fee for procuring a lease, it's crucial to ensure compliance with state laws regarding brokerage activities, and to consult with legal and tax professionals. Additionally, the terms of the partnership agreement must be carefully considered to ensure that such an arrangement is allowed and agreed upon by all parties involved.
Sources: NYC broker fee ban effect on market, Origination Fees on +$100MM Loans, Splits with Buyer Brokers, How to Start an Investment Bank/Brokerage Firm without Being a Licensed Broker?, Brokerage: Why not start your own firm?
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