Before a broker starts a search, most will ask the company to sign a tenant representation agreement. It is usually short, but it sets out the relationship: who the broker represents, what they are being hired to do, where, for how long and how they will be paid. Terms differ from firm to firm and deal to deal, so there is no single standard version. This guide explains what the sections typically address and what to read closely.
Why these agreements exist
An office search involves a lot of work before any deal is signed: organizing the market, touring, collecting proposals and negotiating. The agreement gives the broker a clear basis to do that work and speak for the company, and gives the company a clear statement of what it can expect. It also tells landlords and their agents who represents the tenant, which avoids confusion when several brokers are showing the same buildings. For choosing the broker in the first place, see how to choose an NYC office broker.
What the agreement usually covers
| Section | What it addresses | What to check |
|---|---|---|
| Parties and representation | Which company (and affiliates) the broker represents | That the right entities are named |
| Exclusivity | Whether the company agrees to work only with this broker for the defined search | Exactly what is exclusive, and what isn’t |
| Scope | The kind of transaction: new lease, sublease, renewal, expansion or purchase | Whether renewals or subleases are included |
| Geography and requirement | Where the search covers and what size or type of space | That it matches the search you intend |
| Term | How long the agreement lasts, and whether it renews | The start date, end date and renewal mechanics |
| Broker responsibilities | What the broker will do | Whether it reflects the service you were promised |
| Tenant responsibilities | Usually referring inquiries to the broker and not negotiating separately | What you must do if a landlord contacts you directly |
| Compensation | How and by whom the broker is paid, in different scenarios | Every case in which the company could owe a fee |
| Post-term provisions | What happens for deals that close after the agreement ends | Length, and which properties it covers |
| Termination | How either side can end the agreement | Notice requirements and any minimum period |
General description. Individual agreements vary.
Exclusivity
An exclusive agreement asks the company to run its search through one broker for the defined scope and term. Brokers ask for it because the work is front-loaded, and because a tenant represented by several brokers at once tends to create confusion with landlords about who represents it.
Exclusivity is reasonable when the scope is clear. Read what it covers: one requirement or every real estate need the company has, one city or several, leases only or purchases too. A narrower scope that matches the search you intend is usually easier to accept.
Term, renewal and termination
Agreements run for a fixed period, sometimes with automatic renewal until one side gives notice. Check how long the initial term is, whether and how it renews, how much notice either side must give to end it, and whether there is a minimum period before it can be ended. If you are unsure how long your search will take, ask how the agreement handles a search that pauses.
Existing opportunities
If the company has already been talking to a landlord, touring a space or negotiating a renewal before hiring the broker, raise it before signing. Agreements can include those opportunities, exclude them or treat them differently. Deciding up front avoids disagreements later.
Compensation
In many New York office leases, the tenant’s broker is paid by the landlord, through commission arrangements between the landlord and the brokers involved. That is why many companies pay no fee directly on a typical new lease.
The agreement should also address the less typical cases. Read the compensation section as a set of scenarios:
- A new direct lease where the landlord pays a commission.
- A landlord or sublandlord that does not pay, or pays less than the agreement contemplates.
- A sublease, where the economics are often different.
- A renewal or extension of your current lease, if included in the scope.
- A deal that closes after the agreement has ended, on a property introduced during it.
For each, the agreement should make clear whether the company could owe anything, how much and when. If it doesn’t, ask for that to be added. Also ask the broker to disclose if it represents the landlord of any building in your search, and how it will handle that. Nomad’s approach to tenant representation is described on Find an Office.
Renewals and extensions
Some agreements cover renewing or extending the company’s current lease as well as a relocation. That can make sense, because the best renewal outcomes usually come from testing the market. It should be explicit: whether a renewal is included, and how compensation works if you stay. See renew or relocate.
After the agreement ends
Most agreements include a provision covering deals that close within a set period after the agreement ends, on properties the broker introduced or negotiated during it. The point is to stop a search from being completed without the broker who did the work. Check the length of that period and which properties it covers, and ask for a list of those properties when the agreement ends.
Before you sign
- The named parties include every entity that might sign the lease
- Exclusivity and scope match the search you intend to run
- The term, renewal and termination mechanics are clear
- Existing conversations and your current lease are addressed
- Every scenario in which the company could owe a fee is spelled out
- The post-term provision has a defined length and property list
- Your attorney has reviewed it