A Lease Negotiator and a commercial lawyer each have an important role to play in the leasing process! You will need both and it is important to understand what each of these service providers do.
A Lease Negotiator is typically someone who is engaged by a Tenant to negotiate the important commercial terms of the Lease. They will have expertise in the commercial real estate industry and will be knowledgeable about market trends and the appropriate rent a Tenant should pay, Landlord incentives, the Lease term, options, makegood, guarantees, security bonds and other factors that can impact the negotiation of a Lease. The primary role of a Lease Negotiator is to represent the commercial interests of the Tenant in the negotiation process and to work towards reaching the best outcome for the Tenant, that a Landlord can work with.
On the other hand, a commercial lawyer is a legal professional, who specialises in the laws and regulations that apply to commercial transactions, including Lease agreements. They are trained to interpret and apply the law to ensure that their client’s legal rights and interests are protected. Commercial lawyers are generally responsible for drafting and reviewing Lease documents and identifying and addressing potential legal issues for the Tenant. Commercial lawyers aren’t professionally equipped to advise or negotiate on commercial market factors.
While both service providers are often involved in the leasing process, a Lease Negotiator typically focuses on the deal and financial outcomes of the negotiation, while a commercial lawyer focuses on the legal document aspects of the Lease agreement.
What are the costs of a Lease Negotiator and a commercial lawyer and how much should I be paying for these services?
Commercial Lease Negotiator – Success Based Fee Structure
Lease Negotiators typically have two choices for being remunerated, a fixed fee or a fee that reflects a percentage of the successful results they achieve for the client.
If you engage a skilled Lease Negotiator, who adopts a percentage based on the successful outcome they achieve for you, this means that their payment will be calculated based on the value created for you in the negotiation process. Their remuneration is directly tied to the value created for you, incentivising them to work harder to secure the most favourable terms and conditions on your behalf.
The Lease Negotiator will be personally invested in achieving the best possible outcome for you and will go to great lengths to ensure that they extract every possible benefit from the Lease agreement. They will use their expertise and experience to navigate the negotiation process, identifying areas where value can be created and advantages gained.
Because their compensation is directly aligned to the results they deliver, a good Lease Negotiator will have a strong incentive to work diligently on your behalf in all areas of the Lease transaction including rent, Landlord incentives to the Tenant, rent free periods, eliminating costly makegood requirements, returning security deposits, eliminating personal guarantees and so on …
They will take the time to understand your unique needs and goals and tailor their negotiation strategy accordingly, to ensure that you get the best possible deal in all areas, financial and non-financial. By employing a skilled Lease Negotiator, you can be confident that you will achieve the most advantageous Lease terms and conditions possible.
Commercial Lease Negotiator – Fixed Fee
It is quite common for Lease Negotiators to charge a fixed fee. It is important to be aware that this fee structure has no relationship and is not dependent on the outcome that they achieve for you. This means that their effort may not align with your best interests and may not result in securing the best possible deal for you. There is a risk of the Lease Negotiator settling for less than what could be achieved through further negotiation. Their fixed fee means they may be content with finalising a deal even if there is still room for significant value to be created for you, as they will receive the same amount regardless of the outcome and the required effort.
When selecting a fixed fee Lease Negotiator over a Lease Negotiator remunerated by a success based fee, it is important to consider the alignment of the work required to generate the value potentially available in your commercial Lease negotiation. It is always recommended that a business owner thoroughly research the background and experience before engaging a commercial Lease Negotiator.
In contrast, Lease Negotiators who work on a success basis have a greater incentive to secure the best possible deal for their clients. This is because their fee is typically based on a percentage of the savings or improved terms achieved through negotiation. This fee structure aligns their interests with yours and encourages them to negotiate aggressively to achieve the best possible outcome.
What should I be paying for a lawyer to negotiate a Lease?
Lawyers also use two main methods for charging their clients. They may charge by the hour or they may charge a fixed fee.
Charging by the hour means that the lawyer charges the Tenant based on the number of hours worked on the matter. This can be expensive since the cost can quickly add up, if the matter takes longer than anticipated. Additionally, charging by the hour can make Tenants feel uncertain about how much they will ultimately be charged, as it can be difficult to estimate the total cost upfront and the lawyer isn’t motivated to conclude the transaction as expeditiously as possible.
On the other hand, fixed fee arrangements involve charging a predetermined cost for a particular piece of work. This can provide clients with greater clarity and predictability, as they know exactly how much they will be charged. Using this method, Tenants just need to be sure that all of the things they need are included. A perfect scenario would involve coming to an agreement with your lawyer that they will manage the entire Lease negotiation, including any and all necessary steps, for a predetermined fixed amount, which would avoid any unexpected costs down the road.
It is important to remember as well, that the work of the lawyers is not related to the outcome of the deal, so irrespective of the outcome, you will need to pay your lawyer for their time.
If I use a Lease Negotiator, do I have to use a lawyer too?
Yes, it is always recommended that you have a lawyer review any Lease documents and provide advice, before you sign it. However, if you have used a Lease Negotiator to negotiate the Lease, the Lease Negotiator will have done all the commercial negotiation work and the lawyer will simply be reviewing it from a legal perspective, meaning the cost will be much lower. A typical Lease review and finalisation should be around $2,000 – $2,500 (all inclusive).
Your Leasing Co. specialises in negotiating Leases on behalf of Tenants to secure favourable terms. If you have any questions or need any help to get the best outcome from your next Lease, you can call us for a free, no obligation conversation on 1300 356 702.