Commercial Lease Commission Structure

[Courtney Duong]

Hello BP,

We are in the middle of negotiation with a potential tenant for a 2350 SF at our shopping center. We are getting very close to having the LOI signed and moving into lease drafting. Yesterday we received the Cash Commission Agreement from tenant rep asking for 4% commission of base rent over initial term (10 years term, which we are ok with) with 50% due at lease execution and 50% at rent commencement. We are having issues with paying the commission as they asked since this is 4% of a 2350 SF unit of the entire 10 years term. That's a lot to pay all upfront. In case tenant go dark we will totally lose this amount on commission. So, my questions are:

Should we ask them to spread this payment ongoing?  Like monthly or quarterly?

Can we only pay what we collect?  as in if my tenant goes dark then we are not on the hook for paying this commission?

How would you guys structure this leasing commission payment?  Any creative solutions out there?

Thanks.

[Cason Acor]

You can negotiate to structure it however you’d like. How it’s presented here, monthly, quarterly, annually, whatever. I’d also add that 4% commission is a little high if they’re just the tenant rep, and not representing you as well. Everything is negotiable.