Top Tips for Negotiating Commercial Leases - #11 Insist on an Exclusive Representation Agreement

“I won't sign an exclusive representation agreement. I want to keep my options open.”

This is a common comment from prospects who are fearful that an exclusive agreement will restrict them. Behind this comment is also the assumption that an exclusive agreement is only there for the tenant rep broker’s benefit. The reality, however, is that clients should NOT engage a broker who is willing to work without an exclusive representation agreement. There two primary reasons for this:

Time - working with 2-3 brokers wastes the client’s time because all agents will likely find the same properties and the client will then have 2-3 conversations about the same properties wasting time.

Attention – the client deserves the attention of the broker and they just won’t get it without an exclusive. Tenant representatives are business people who have families, mortgages, tuition bills, etc. just like everybody else. So they must spend their time where they can reasonably expect to earn a living. Without an exclusive, they can’t assume that and, therefore, will not really work on behalf of the client. They might send the client information on a property that happens to cross their desk, but they won’t go out in search of what is best for the client.

“What if my tenant rep just isn't working my lease? Shouldn't I be able to fire him?”

Absolutely. Real estate has always been a pay for performance industry. If the performance isn’t happening, a client should be able to hire someone else. In my representation agreement, I give my clients the right to terminate the agreement with 30 days notice at any time. I get 30 days to get the client happy, but if I can’t, I’m fired and they move on. I have never been fired and am confident that I never will, so I don’t see this as a big risk, but it gives my clients peace of mind.

Bottom line - get references like you would for any other service. Don't buy and then regret. Know who you are working with before you sign the exclusive. But by all means, insist on an exclusive representation agreement.