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  • Writer's pictureTom Miller, CCIM

Understanding “Agency” for an Industrial Real Estate Tenant – And Why it Matters

With respect to the landlord/tenant relationship, we understand that an agent is the person who represents one of those parties. But when we define the term “agency” for this post, we aren’t referring to the agent’s brokerage company. In this context, agency refers to the duties, actions and obligations of the agent to one of the parties during the transaction. This may seem like a subtle difference, but in fact it has a significant impact on the transaction as a whole – and tenants need to be very clear about how.

First, some background: The landlord/tenant relationship has similar attributes to most business relationships. In most instances, one side needs what the other side adds to the relationship, but both sides want the best outcome for their respective business. Both sides want to do business and yet want the best terms for themselves. Almost exclusively, the actual principals of the property ownership group and the tenant owner never meet, talk nor communicate directly. In fact, far from it. Enter the agent and their agency duties. This is where all tenants need to pay close attention and understand three critical points.

  1. Point One

The landlord has a brokerage agent and, in many instances, a property management agent. They interact with tenants within their property portfolio. If the agency an agent works for has signs in front of the property or on the sales flyers, that agent is working for the landlord. These agents are under legal contracts with the landlord to represent the landlord exclusively in operating the property. A tenant must be very clear about this.

  1. Point Two

Tenants need to understand that the landlord’s agents with whom they interact have a legal service to perform for the landlord. In addition, they are paid by the landlord for their services. They have specific duties the landlord contracts for and pays them for, such as retaining the tenants within the property at the lease rates and lease terms the landlord desires to achieve. Clearly, those lease rates/terms will naturally be landlord friendly. That’s what the landlord’s agent is paid to achieve. This means that the landlord’s agents with whom you interact are paid by the landlord to achieve landlord-favorable results – not tenant-favorable results.

  1. Point Three

With respect to the manner the landlord’s agent must deal with tenants, they are simply required not to be deceitful, fraudulent or dishonest and to not break any laws. That pretty much sums up the extent of the standard the landlord’s agent is held to when dealing with tenants.

With respect to what the landlord’s agent owes the landlord, we see a different set of obligations. That agent must skillfully or carefully carry out the terms of the brokerage agreement; not disclose, except to his broker, confidential information relating to the landlord; seek a lease for the property at the price and terms stated in the brokerage agreement or at a price acceptable to the client; disclose to the landlord material facts of which the agent has knowledge concerning the real estate transaction; and many more. If this is sounding like a one-way street, it is. Essentially, any information advantage about your business goes straight to the landlord but any landlord information you should be aware of will not come back to you. To put it another way, whatever you confide to the landlord’s agent must be shared with the landlord, but don’t expect anything in return.

There are several other important points tenants need to be aware of with respect to dealing with the landlord’s agent, but at least a clear picture of the landlord’s agent and his agency obligations should be forming. And that picture should lead you to this takeaway: As the tenant, you will be far better served at the negotiating table with an agent of your own representing your sole interests. The next question might be, how do I find the right one?

Start by reading these:

Then contact Miller Industrial Properties directly. A phone call is likely all it will take to quickly make it clear that we know this business, and we do it well.

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Miller Industrial Properties, Sparks, Reno, Nevada
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