{"id":1004165729,"date":"2017-02-01T11:55:22","date_gmt":"2017-02-01T19:55:22","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004165729"},"modified":"2022-12-07T06:53:37","modified_gmt":"2022-12-07T14:53:37","slug":"do-real-estate-brokerage-firms-have-a-conflict","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/do-real-estate-brokerage-firms-have-a-conflict\/","title":{"rendered":"Do Real Estate Brokerage Firms Have a Conflict?"},"content":{"rendered":"<p>By Manuel Fishman, Shareholder, Buchalter Nemer<\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004161236\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/ensure-your-investments-are-insured\/manuel_fishman\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg\" data-orig-size=\"365,271\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"Manuel_Fishman\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg?w=365\" class=\"alignright size-medium wp-image-1004161236\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg\" alt=\"Manuel_Fishman\" width=\"300\" height=\"223\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg 365w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Manuel_Fishman.jpg?resize=300,223 300w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>There has been a bit of an uproar lately\u00a0as to whether large national brokerage firms have a conflict of interest in representing both owners and tenants, in general and in the same transaction. The argument goes that brokers are beholden to owners, and therefore do not aggressively represent or advocate for tenants, in particular as it relates to disclosures of physical conditions, measurement standards for rentable square footage, and opaque property and asset management fees. Some have painted this as a \u201cDavid vs. Goliath\u201d issue, with building owners and brokers being the Goliath, and the small tenants, who are the rent generators, being cast as David.<\/p>\n<p>Marketing space in commercial buildings is not easy. The value a brokerage company brings to the table for an owner is measured in the difference between a successful lease-up program and a gaping hole in a building\u2019s pro forma based on occupancy. By far the highest cost in a lease transaction, after tenant build-out, is the brokerage fee. The lesser-known fact is that the majority of that fee goes to the \u201cprocuring\u201d broker \u2013 the broker that procured the tenant \u2013 and that broker is usually the tenant\u2019s broker. So, a national brokerage company that can represent both the landlord and the tenant, through separate leasing teams \u2013 which is called \u201cdual agency\u201d &#8211; can keep more of the fee \u201cin house\u201d than in a transaction in which two brokerage companies are involved.<\/p>\n<p>Does that in and of itself present a conflict? Not under the laws of most states, which allow for dual agency. However, dual agency must be disclosed to each party and each party must consent. Does one party get less effective representation because of this? If one tries to analyze this situation based on the choices of big corporate users of space, for example, the answer is no. This is because, in the majority of cases, the role of the broker is to be a \u201cmarket maker.\u201d Put in perspective, national brokerage companies see hundreds of transactions in a market, and have a database of transactions and deal terms that is incomparable \u2013 whether they represent owners or users of space.<\/p>\n<p>While there is an argument that \u201ctenant-only\u201d brokerage companies add unique value to tenants searching for space, it is less clear if brokerage companies have an inherent conflict when they offer tenant services and place their tenant clients in buildings where they also represent the owner, so long as the dual agency is disclosed in advance.<\/p>\n<p>The California Supreme Court recently handed down a decision that clarifies a broker\u2019s duties where the brokerage company acts as a dual agent. The general rule enunciated by the court is that in a dual agency situation, a broker owes the same duty of utmost care, integrity, honesty and loyalty to both clients &#8211; the landlord and the tenant \u2013 even if the brokerage company has different teams representing each side. The court noted that the duty of trust and loyalty that a broker and salesperson owe might raise concerns that in certain circumstances confidential information about a client\u2019s motivations and a salesperson\u2019s beliefs might be subject to disclosure, and harm a client. However, the court concluded that, when properly supervised and implemented, dual agency does not pose a conflict of interest. This is because, in the majority of cases, the application of the broker\u2019s duty arises in the context of disclosing facts materially affecting the value or desirability of a property.<\/p>\n<p>While there are always exceptions, when brokerage services are placed within the full suite of services that are needed for a large owner or user of commercial real estate\u2014including property and facilities management, budgeting, financial modeling and reporting, space planning, market intelligence and peer comparisons\u2014the value that a full-service brokerage firm brings to both an owner and a tenant is greater than the potential for conflict in a dual agency context.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Manuel Fishman, Shareholder, Buchalter Nemer: A discussion about the value a full-service brokerage firm brings to both and owner and tenant versus the potential for conflict. <\/p>\n","protected":false},"author":1166,"featured_media":1004161236,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[23891,21684],"tags":[32982,32983],"class_list":["post-1004165729","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-national","category-viewpoint","tag-buchalter-nemer","tag-manuel-fishman"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Do Real Estate Brokerage Firms Have a Conflict? 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