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Updated 9 months ago, 04/04/2024
Commercial Lease Renewal Option - Commissions - who pays?
We have an office building with a great long term tenant, that is in a below market rates, and we're good with it because they are stable and NNN. Their lease is up for renewal, and contains one Option to renew, which they've notified us they want to exercise. We sent over a simple form to execute the option, but tenant says they work with a broker on their real estate leases. That broker sends over a lease LOI with terms very disadvantageous to us, one of which is that WE pay him a commission (essentially to negotiate against us).
My question is: Is it typical that the Landlord pays a commission (4%) in a case like this? It's our existing tenant who wants to stay at a great rate, and we want to rent to them at that great rate. If the tenant insists on using this broker (their choice, I guess), we're obviously just going to bake the commission into their new monthly rate because we're certainly not going to absorb a 4% commission to keep our existing tenant on executing a simple lease option.