Broker commissions on lease deals that are generally accepted are discussed below. It is important that anyone involved in the buying and selling of real estate knows who pays the commission and when, and that all terms and clauses are understood.
As with many things CRE, commissions can be subject to negotiation.
Terms: commission for lease deals longer than 12 months
- 5% on the first two years’ gross rental
- 2.5% on gross rental for years 3 to 5
- 1.5% on gross rental for years 6 to 8
- 1% on gross rental from year 8 onwards
Explaining the above terms
Gross rental is generally the sum of the basic rental, parking rental and other costs generally paid by the landlord and recovered from the tenant (such as assessment rates, operating costs (covering generators, city improvement district levies, security etc.)).
The above are escalated as per an agreed-upon escalation rate.
By way of example, the commission on a property of say 400 square meters at a gross rental of R185 / sqm for say 20 parking bays at R850 / bay, on a five year lease escalating at approximately 8%, would work out to approximately R210K.
Who pays on a lease deal?
It depends. Brokers get paid by the landlords (property owner).
Corporate real estate services providers get paid generally by their client (tenant).
When is the commission paid on a lease deal?
This varies from landlord (property owner) to landlord.
This can range from receipt of the deposit by the tenant to payment of the first month’s rental and any tenant installation over-runs.
What is an effective cause?
To be paid, a broker (satisfying the regulatory requirements of the profession) must be the “effective cause” of the transaction. In evaluating “effective cause” of the transaction, a broker’s efforts must be established as the decisive factor that triggered the leasing deal, or were overridingly important in the conclusion of
the transaction. Such evidence of a broker’s efforts is generally an approved offer and a signed lease, obtained by the broker and provided to the landlord.
Commission terms for leases up to and including 12 months
The payment can be a maximum of 1 month’s gross rental[/vc_column_text][/vc_column][/vc_row]
