Broker commissions – lease deal

Broker commission CRE

The below are generally-accepted broker commissions on lease deals.

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

It depends. Brokers get paid by the landlords (property owner).

Corporate real estate services providers get paid generally by their client (tenant).

When is commission paid

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.

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

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