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In the vast majority of commercial leasing situations, your future landlord will draft your lease and provide you with a final copy. He or she might use an attorney or commercial real estate agent, or they might do it on their own. You typically won't have to draft a lease, but you do have the opportunity to employ the services of a commercial real estate broker and/or a commercial real estate attorney. If you go it alone, you don't have to pay any of the associated legal fees or broker fees, but you risk incurring many other costs. Commercial real estate professionals, at least the good ones, save you time and money which often totals much more than you spend on their fees. Below we have provided on overview of attorney fees and broker fees including some of the ways each can help you and things to consider before hiring a lawyer or agent.
If you choose to hire a real estate attorney to help with your commercial lease, your fees will vary based on location and the exact purpose for which you hire the attorney. Although exceptions exist, the general rule is that the closer you are to a large urban area, the higher your attorneys fees will run. Some attorneys might charge you a flat rate for reviewing your lease or another specific task, but most often you will pay by the hour. On average, you can expect to pay somewhere between $250 and $350 per hour for services, but it's in your best interest to ask for a fixed rate.
Some of the ways a commercial real estate attorney can assist you include:
Commercial leases are large documents which need to be reviewed for accuracy. It's not uncommon for a landlord or property management company to use a lease template and forget to change necessary information. A lawyer will comb through your commercial lease and ensure everything is correct and represents the terms you agreed to. If you choose not to have your lease reviewed for accuracy, you risk over-payment or paying for the wrong things in your lease, which could hurt your bottom line. Additionally, taking legal action later on is difficult when you signed an inaccurate lease.
Attorneys are skilled negotiators by trade. It's almost always in your best interest to negotiate the terms of your commercial lease, especially when the market favors tenants. A good commercial real estate attorney won't leave money on the table. Not only can they possible negotiate a better base rental amount, but they can help negotiate other landlord concessions and tenant improvement budgets. Attorney fees for negotiating terms of a lease vary based on how long negotiations take. Your attorney might have one or two hours invested or a dozen.
Common Area Maintenance (CAM) fees are a specific part of the terms to be negotiated. They deserve special attention because they are monthly fees you pay on top of your base rental rate. Some CAM fees are standard and make sense. For example, you might contribute to your portion of janitorial services for cleaning public restrooms all businesses share in a building or your portion of trash collection fees from dumpsters each week. Other times, landlords might try to slide other costs in CAM fees which shouldn't be there. A lawyer can review CAM fees for accuracy and compliance with the law.
Sometimes landlords or property management companies push ethical boundaries, especially with tenants who are new to signing a commercial lease. Hiring a commercial real estate attorney sends a signal to landlords that attempts at deception and any other questionable practices won't be tolerated. The mere presence of your attorney in the business transaction is likely to prevent property owners from trying to push those boundaries.
Commercial realtors can help you through the leasing process much like a commercial real estate attorney with one major difference—real estate agents and brokers cannot give legal advice. When you use a real estate broker, your fees are built into the transaction. You rarely need to pay out-of-pocket like you do for an attorney. A commercial real estate broker collects a commission, more accurately splits a commission with the listing agent. Although percentages can vary, most commissions are somewhere between four and six percent. Ultimately, if you use a commercial real estate agent to guide you through the commercial leasing process, it won't cost your company a dime (you don't cut the check, but it is still factored into the deal).
As mentioned above, commercial real estate agents cannot provide legal advice, but they are familiar with the process so they understand the forms and terms enough to explain things to you. Although you don't have to pay for an agent and they can offer you many of the same benefits an attorney can, you should consider the following things before choosing between an attorney, a real estate agent, or going it alone.
You might drive past a commercial property you like and contact the agent listed on the sign without employing your own tenant agent. This can be risky. Listing agents work for property owners, so they won't have your best interest at heart. You likely will only get the info legally required and nothing more. A tenant agent will work to put together the best deal for you.
Commercial real estate agents have market knowledge which likely goes far beyond what you or a commercial real estate attorney has. This is especially beneficial when you are search for a property. In some cases, an agent might even know about properties which haven't been listed yet. A lawyer can help you with due diligence, but your real estate agent can help you find that perfect commercial property for your business.
Commercial real estate agents have likely been exposed to different types of leases, even long triple net (NNN) leases and percentage leases. Yet, they cannot offer the same in depth legal advice about a 10 or 20-year lease that a real estate attorney can. When signing a complex lease, it's in your best interest to make sure a qualified commercial real estate professional is on your team.