Seller-leaseback - Commission owed?
I bought a Class A 50,000SF office property in PA. It's currently 50% occupied. One of the stipulations of the purchase was the seller lease back 10% of the vacant space. After I closed, the broker (who repped both sides of the transaction) says I owe him a commission for leasing to the seller. I was under the impression the seller lease-back was a part of the sale. No word was mentioned about a potential leasing commission during the sale. Is the broker being unreasonable or am I?
Based on the most helpful WSO content, the situation you’re describing can be tricky and often depends on the specific terms outlined in your purchase agreement and any brokerage agreements. Here are some key points to consider:
Seller Lease-Back as Part of the Sale: If the seller lease-back was explicitly included as a condition of the sale and no separate leasing commission was mentioned or agreed upon during negotiations, the broker's claim might be questionable. Typically, such arrangements are considered part of the overall transaction, and commissions for the sale would cover it.
Broker's Role and Expectations: Brokers often expect leasing commissions for lease-back agreements, especially if they facilitated the lease terms. However, this expectation should have been disclosed upfront. If it wasn’t, the broker might be acting unreasonably.
Market Practices: In commercial real estate, commissions for leasing are usually paid by the landlord (you, in this case) and are often calculated as a percentage of the lease value. However, this varies by market and should be clearly outlined in any agreements.
Documentation is Key: Review all agreements and documents related to the sale and lease-back. If there’s no mention of a leasing commission, you may have grounds to dispute the broker’s claim.
Negotiation or Legal Advice: If the broker insists on the commission and you believe it’s unwarranted, consider negotiating or consulting a real estate attorney to clarify your obligations.
In summary, the broker’s claim for a leasing commission might be unreasonable if it wasn’t disclosed or agreed upon during the sale. However, local market norms and the specifics of your agreements will ultimately determine whether the commission is owed.
Sources: Commercial Real Estate Broker Compensation, Let's Talk About Broker Compensation, Splits with Buyer Brokers, Debt Placement Fees
Is there not a contract or listing agreement that stipulates how this works one way or another?
I only purchased the building. There was no separate contract or agreement for the sale-leaseback to the former owner. Broker called me up after the sale closed and said there will be a commission for leasing to the seller.
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