If you’re a regular reader of this blog, you know I’m an owner of Commercial Brokers International, so you might assume I believe in representation agreements simply because I’m a broker. That’s probably partially true, but I’m also an investor.
I’ve invested in single-tenant net lease properties for several years, and I’ve learned how important it is to have a great broker in my corner. When I take on a new client, I won’t work with them without a representation agreement.
Over the years, I’ve come to appreciate how these agreements clarify the relationship for both sides. Here are a few reasons why.
Representation Agreements Are Now Required in California
Effective January 1, 2025, buyers’ agents in California must enter into a buyer-broker representation agreement with their clients. The agreement must be signed before the agent takes the client on a property tour.
Beyond meeting the legal requirement, the agreement establishes the broker’s responsibilities, the client’s expectations, and how the relationship will work from the beginning.
They Help Prevent Commission Disputes
Without a representation agreement, two brokers can claim credit for the same transaction. The client can then be dragged into the dispute—or potentially face claims for a second fee.
A clear agreement with a defined scope, term, and protection, or “tail,” period establishes who is representing the client and who may be entitled to compensation.
For those who don’t believe this situation can happen, I’ve seen it firsthand.
I once listed a building in a very hot market and received more than 20 offers during the first week. Surprise, surprise—the three best offers came from the same buyer and were presented by three different brokers.
A representation agreement could have made it clear which broker was authorized to act on the buyer’s behalf.
Overlap Should Be Addressed When Changing Brokers
If a client switches brokers, the new representation agreement should identify any properties that are excluded because they remain protected by the previous broker’s tail period.
Alternatively, the agreement can state that the new broker will split or credit the fee.
Addressing this during the transition helps prevent two valid agreements from claiming the same transaction.
You Get One Point of Contact and a Dedicated Advocate
When I’m acquiring properties, I prefer to work with one broker who I know is among the best in the market and asset class I’m targeting.
Communication is simpler, responsibilities are clearer, and I’ve found that we’re much more effective when we work together as a team.
Instead of receiving scattered information from several sources, I have one trusted professional who understands my objectives, knows what I’ve already reviewed, and can evaluate opportunities through that lens.
Your Broker’s Interests Become More Closely Aligned With Yours
This may be the most important point.
Without an agreement, a broker may have an incentive to focus on opportunities that can produce a commission quickly—particularly if another broker might otherwise secure the transaction.
With exclusivity, the broker can focus on finding the best transaction for the buyer or tenant, even if the process takes longer or requires more extensive research and negotiations.
The broker has greater confidence that the time and resources invested in the assignment will be protected. In return, the client can expect a more focused and committed search.
Fee Language Clarifies Who Pays
A representation agreement typically states that the broker will first seek payment from the landlord or seller. Any fee paid by the other side is then credited against the client’s obligation.
This helps prevent the client from being billed separately on top of a fee that has already been paid through the transaction.
The agreement should clearly explain how compensation will be handled so there are no surprises later.
What Happens if the Broker Isn’t Performing?
This also needs to be addressed in the agreement.
After a specified period, the buyer or tenant should have the ability to cancel the agreement if the broker isn’t performing as expected. The broker should then provide a list of the properties they introduced or showed to the client and for which they may retain representation or compensation rights during the tail period.
The client should share that list with the new broker so the same properties aren’t presented again without first addressing the existing protection.
A clear termination process protects everyone and makes the transition easier.
Clarity Makes the Process Easier
Commercial real estate is a relationship business, but having a clear understanding of how the relationship and transaction will work gives both the broker and the client a better picture of what to expect.
When you’re buying or leasing commercial real estate, there are a lot of moving parts. The more clarity you have in your broker relationship, the easier the entire process becomes.
A well-written representation agreement isn’t meant to make the relationship more complicated. It’s there to define responsibilities, align expectations, and protect everyone involved.
Joe Killinger is a partner at Commercial Brokers International and founder of the CRE Affiliate Network. Come hang out with me on YouTube, Instagram, and X at @JoeKillinger, and find more at JoeKillinger.co.
