There’s a term in the real estate game that is of huge importance, and that is “the effective agent”. It is the “effective agent” who earns the commission or brokerage fee when a property lease contract is signed.

A major challenge arises in the property lease market when more than one individual can lay claim to being the effective agent.

This happens surprisingly often, particularly when a nationwide organisation doesn’t have, or doesn’t enforce, a policy for who is responsible for acquiring new premises.

What can happen is that both head office personnel and regional branch managers begin hunting for a new property at the same time using different agencies.

I have frequently come across this sort of double-up which can cause a huge headache for all concerned.

For example, in a town say the size of Napier, a branch manager knows his property lease is about to expire without a renewal. He then has a chat to a local real estate agent about some possibilities, looks at a few and says he likes the look of one particular option.

Meanwhile the manager in charge of property at the company’s head office has also been hunting for a new property, has viewed a short list and (surprise, surprise!) is in the process of signing a contract via a different agency on the very same property as the branch manager.

Now the battle begins as both real estate agents lay siege to the landlord, each claiming to be the “effective agent” as they introduced the tenant to the property.

In a tenants market, the landlord may feel pressured to pay both agents, and when you are talking about a possible commission of $26,000 on a $175,000 lease, this mistake hurts and does not get the tenant off to a good start with the landlord at all.

I have found that having good property policies and processes makes managing your lease portfolio much more effective and avoids problems like this.

At Parallel Directions we are increasingly working with clients in developing policies and processes so they can get better outcomes across their property portfolios.

In tough economic times businesses need to manage their property smarter. Instances such as this example can become a real nightmare, being costly in terms of time wasted as well as the direct extra cost to the landlord, with downstream impacts on your relationship.

This entry was posted on Tuesday 9th December 2008 and is filed under Property Leasing. Both comments and pings are currently closed.