Landlords are experts in managing and leasing their properties. When you, as a tenant, sit down with a landlord to negotiate, you can be certain that they have come to the table armed with information from both in-house and outside real estate professionals. The real estate professionals that work for the building owners and landlords must be licensed and are bound by rules, regulations, and ethics outlined in the Alberta Real Estate Act and governed by the Real Estate Council of Alberta (RECA).
ARE YOU A CLIENT OR A CUSTOMER?
In the context of real estate brokerage, a “Client” hires or employs a real estate broker to assist them with their real estate needs. When a landlord hires a real estate professional to list, market, and lease their property (either in-house or from an outside brokerage) they have entered into what RECA would consider a “Client Relationship”.
What this means is that the landlord’s broker has significant fiduciary duties to the landlord. These include, but aren’t limited to the duty of undivided loyalty, confidentiality, and acting in the best interests of the landlord at all times.
The landlord’s broker must act solely in the landlord’s best interests and must always put the landlord’s interests above the interests of the other party (that’s you, the tenant!). This means protecting the landlord’s negotiating position at all times.
If you are using the landlord’s broker it means you have no representation at all. You are what RECA defines as a “Customer”.
The landlord’s broker does not owe you, the “Customer”, these fiduciary duties. The landlord’s broker will be “limited to acting honestly, using reasonable care and skill, and not negligently or knowingly providing false or misleading information.”*
The landlord’s broker solely represents the interests of the landlord/building owner. The only way a tenant can balance the advantage the landlord has in a lease negotiation is to engage a qualified, experienced, and specialized tenant representative.
THE POWER OF REPRESENTATION
When you, the tenant, engage a tenant rep broker to assist you, your broker has a duty and obligation to look after your best interests with undivided loyalty, confidentiality, and without conflict of interest.
WHO PAYS FOR YOUR TENANT REPRESENTATIVE’S SERVICES?
In almost all cases the landlord pays the commercial real estate brokerage fees. The fees are built into the building’s annual budget and the fee is paid whether or not you have representation. In the absence of a tenant representative, the landlord’s professionals (the listing agent, property manager, asset manager etc.) will usually be paid the entire fee.
*Real Estate Council of Alberta Agency Relationships Guide
