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Updated about 2 years ago on . Most recent reply

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Mohammed Rahman
  • Real Estate Broker
  • New York, NY
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Understanding commercial lease commission payout term/wording

Mohammed Rahman
  • Real Estate Broker
  • New York, NY
Posted

Hello BP community!

I recently closed a commercial lease transaction and needed some help understanding the commission payout structure. Although the broker explained it to me over the phone, I didn't make a note of it unfortunately. Has anyone come across the term "7s and 3s" as it related to a commission structure on a lease? It's already in writing, and in our MLS - I just have never heard the term before and couldn't find anything online.

We signed a 3-year lease @ $19.5/sq.ft for a 4400 sq.ft space.

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Ronald Rohde
#3 Commercial Real Estate Investing Contributor
  • Attorney
  • Dallas, TX
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Ronald Rohde
#3 Commercial Real Estate Investing Contributor
  • Attorney
  • Dallas, TX
Replied
Quote from @Joseph Gozlan:

Commercial lease commissions are calculated like this:

Pay at closing: (Annual rent * number of years * commission percentage)

Pay at renewal: (new Annual rent * number of years in option * renewal commission percentage)

Note:

1) Not all agents charge the renewal commission 
2) actual percentages are negotiated between agent and landlord when the listing agreement is signed. 


 I'd clarify annual rent is just Base Rent, and may have a 50% signing, 50% at possession depending how long the build out costs/takes.

  • Ronald Rohde
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