Choose Your Teammates Carefully
I love having a good commercial broker on my team. A good broker is much more knowledgeable about the economics of a potential deal than I will ever be and understands the market better than me. A broker who knows his or her stuff will have done the heavy lifting on putting the deal together, negotiating the essential terms and completing initial due diligence before I am brought into prepare the operative documents and close the transaction. When we get to sticky issues, the best brokers can play good cop to my bad cop or vice versa.
But sometimes, you get agents, and I am purposefully switching to the term agent here, who get in over their head. These agents should not be handling commercial deals. I am talking specifically the agents who are residential agents who attempt to get involved in commercial deals. Either they see an opportunity for a bigger commission and believe that commercial deals are no different than the house closings they are used to closing or, they are working with a friend or relative “as a favor” (and the commission is an added bonus). When a residential agent is involved in a commercial transaction, I, as the attorney, have to take extra special care with my client because I know that the client has not been represented well before engaging me and is likely not sophisticated in the world of real estate.
Just the other day, I got a call from an agent who was referred to me by a friend of a friend. She was representing a client who was going to open a new café in the Edgewater area of Miami and needed a lease reviewed. Of course, this was an “urgent” matter and the lease had to be signed by the end of the week. The agent wanted to know if I could review the lease by the end of the day. My alarms started ringing. I asked the agent why the rush. She told me that the landlord had a lot of interest in the space and the shopping center was very desirable. I told the agent that I could begin reviewing the lease that day, but there was no way that I could finish it by the end of the day. Without asking, I told her that I could surmise the length of the lease and that to give it a thorough review, I could not read it that quickly. But more importantly, I asked the agent if she had done any due diligence on the property. She was befuddled. What did I mean? I asked her if the space was zoned for a restaurant. She told me that it was previously used as a Papa Johns so zoning wasn’t an issue. When I told her that because Papa Johns generally had no seating and that because the client’s café likely would, zoning might be an issue. In addition, if any alcohol was going to be served, zoning and use issues could also be an issue, not to mention liquor licensing. Had she checked any of those questions? The agent said she had not. I asked her who was going to be paying for the TI and how long the TI would take. Did the client need the pizza oven? She had no answer.
We chatted a little longer about other issues that might come up in the lease and I explained that these were just a few of the reasons why it might take me longer than the day to review the lease. She thought that these were very good reasons and that she would definitely give my name to the client for her to call me to discuss my fees. I never heard from the agent again, nor did I hear from the client. I can only wonder whether the agent ever related my concerns or whether she was too embarrassed to let the client know that if she signed the lease, she was setting herself up for big time failure.
It is nice to be able to throw business to your friends and family. But it is more important to have the right people working for you. Your friends, if they are really friends, should refer you to someone with the proper experience to help you properly. In the case I just mentioned, the agent should have referred her client to an experienced commercial broker who specialized in restaurant leases. A good broker not only would have steered the client into a proper property and lease and at least done some preliminary due diligence, but he would have likely paid the agent a referral fee. Everyone wins in that situation.