Agent fee of 11% of first years rental - does it account for Rent Free Period?

[one9]

Hi,

We recently did a sublease of an office. The real estate agent advised at the start that "Our fees if we find a tenant are the industry standard of 11% plus GST of the first years rental plus GST."

We gave the subtenant two months rent free.

Should the real estate agency fee be based on the actual rental amount (ie. taking into account the rent free period)? or should it not take into account the rent free period?

 

[Kristine..]

Hi one9

Welcome to the forum

We recently re-let two commercial properties, one with no rent free period, and one with 3 months rent free.

The lease stated the Annual Rent payble by the tenant. The fact that we waived 3 months of rent did not lessen the Annual Rent pertaining to the lease.

We paid Letting Fees on the Annual Rent as per the lease


It is important in commercial that the Annual Rent is clearly stated, as the rent is capitalised to the value of the property. Hence, if the Annual Rent had been shown as 9/12 of the total value, we would have been undermining our own value, and the ratchett clause for rent increases would also have been seriously compromised

It is all part of the same thing, and the Agent's fees are no exception

Good luck with the reletting. We had no vacancy at all with our two properties, but for the larger one had to negotiate quite hard to keep the rent up, thus had to compromise on the rent free period.


Interestingly, both new tenants are Church groups, not-for-profit organisations. Sign of the times?

Cheers
Kristine