June 27th, 2011 at 11:34 pm
As you know, in this market we have seen an increase in our lease business. People are losing their homes in foreclosure or going through short sales, and do not have the credit or money to buy a new property. As a result, there are many more leases in our market place. In that context, we have noticed one issue with our practice that we wanted to address. In most leases where we represent the landlord, we get a Lease Listing Agreement signed. In that Agreement, paragraph 3 deals with compensation and paragraph A(1) covers fixed term leases. Paragraph A(1)(a) is the clause where we should place the percentage commission rate, such as 6% “of the total rent for the term specified…” Our problems have arisen in paragraph A(1)(b), which relates to renewal commissions and provides as follows: “Owner agrees to pay Broker additional compensation of ___________ if a fixed term lease is executed and is extended or renewed.” What we have seen on multiple occasions is that the blank in that clause is not filled in. Of course, in all those cases the lease we originally negotiated was renewed, and we wanted our renewal commission. Unfortunately, given the fact that this is a CAR contract, and we are deemed the experts on the document, a blank where the compensation term is supposed to be will be interpreted against us. In other words, if we do not fill in the blank in that paragraph, we are most likely waiving any renewal commission. The percentage in paragraph (a) does NOT automatically get read into paragraph (b). As a result, please make sure you fill in both blanks, the first relating to a commission for the original lease, and the second for a renewal commission. If you don’t, you will unnecessarily be waiving commission money that you have earned.
As always, please feel free to contact us with any questions you may have.
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