Commercial Real Estate: Brokers, Benefits, and Broker Liens in Michigan
Finding the perfect commercial space or buyer can be complex and time consuming. Given the many demands on business owners, many opt to outsource to a commercial real estate broker or agent. Commercial brokers and agents are highly specialized real estate professionals who can make or break your transaction. This article, written by the real estate law attorneys of Thompson Legal, will help provide a foundational understanding of commercial real estate brokers and agents, as well as highlighting some of the key legal aspects you should be aware of.
Please note that this post is not exhaustive, and every situation is unique. In the event that you have legal questions about working with a commercial real estate broker, it’s advisable to speak with a licensed attorney. Contact Thompson Legal to speak with a Michigan real estate attorney today.
What is a Commercial Real Estate Broker?
Commercial real estate brokers and agents act as trusted advisors for your commercial property needs, whether you're buying, selling, or leasing. Licensed professionals, commercial real estate brokers possess in-depth knowledge of the local market, property types, and current trends. They work for either the buyer or seller (and sometimes both) to:
Identify suitable properties: Brokers understand your needs and help you find properties that fit your budget and operational requirements. They can leverage their network of contacts and access to exclusive listings to find properties that may not be publicly advertised.
Navigate negotiations: Their expertise in pricing strategies and market conditions allows them to negotiate favorable terms on your behalf. Brokers understand the nuances of crafting compelling offers, counteroffers, and navigating lease agreements to secure the best possible deal for you.
Facilitate paperwork and closing: Commercial real estate transactions involve a mountain of paperwork. Brokers handle the complex documentation, ensuring a smooth closing process. They can explain complex legal jargon and help you understand the implications of each document you sign.
Market your property: If you're selling or leasing, the broker leverages their marketing skills and networks to present your property to a wider audience. They can develop targeted marketing campaigns, create high-quality property brochures, and leverage online platforms to maximize exposure for your property.
2. What are the Benefits of Using a Commercial Real Estate Broker?
There are many ways in which using a professional commercial real estate broker or agent could benefit your transaction. Beyond the services of buying, selling, and leasing commercial properties, a real estate broker has uniquely tailored their skills to make commercial real estate transactions as smooth as possible. Some of the most common benefits of working with a commercial real estate broker or agent include:
Save Time and Effort: Brokers streamline the process, saving you valuable time and energy you can dedicate to running your business. They can handle the legwork of searching for properties, scheduling tours, and coordinating with various parties involved in the transaction.
Market Expertise: Their insights into market trends and pricing ensure you get the best deal possible. Brokers have access to market data and analytics that can inform your decisions and help you avoid common pitfalls.
Network Access: They have access to a vast network of contacts, including lenders, appraisers, property managers, and other industry professionals. This network can be invaluable in finding the right financing options, qualified tenants, or reliable contractors for renovations.
Streamlined Transactions: Brokers manage the intricate paperwork and documentation, ensuring a smooth closing. They can identify potential issues early on and work to resolve them before they delay the closing process.
Financing Assistance: Some brokers have connections with lenders and can help you secure financing for your commercial real estate purchase. They might be able to negotiate favorable loan terms or recommend lenders specializing in your property type.
Property Management: As mentioned earlier, some brokers offer property management services. This includes overseeing maintenance and repairs, tenant relations, rent collection, and ensuring the property complies with relevant regulations. Brokers can assist with lease administration tasks, such as renewals, rent escalations, and lease termination negotiations.
It's important to note that not every broker or agent offers all of these services. Discuss your specific needs during initial consultation to understand what they can provide and to ensure that they align with your requirements.
3. What Does it Cost to Work With a Commercial Real Estate Broker?
A commercial real estate broker or agent can be a valuable, but pricey, asset when navigating the complexities of buying, selling, or leasing commercial property. In most cases, the seller or landlord pays a broker's commission. This means the broker's fee is typically built into the asking price or lease rate. However, there can be exceptions. In some situations, a buyer may choose to hire their own broker for specific representation. Commercial real estate commissions are typically a percentage of the total transaction value, ranging from 4% to 8% depending on the property type, location, and market conditions.
While the commission is the primary cost, there may be additional fees associated with marketing the property, such as:
Professional photography
3D tours
Brochures and flyers
Online advertising
These fees will usually be discussed and agreed upon upfront in a listing agreement between the client and the broker.
4. Commercial Broker Liens
Michigan law allows licensed commercial real estate brokers to file a lien against a property if their commission remains unpaid. This commercial real estate broker lien acts as a legal tool to secure payment for their services. A lien can cloud the title of the property, potentially hindering its sale or refinancing, and commercial brokers can even choose to foreclose on those liens in circuit court.
Commercial brokers' liens are strictly governed by the Commercial Real Estate Broker’s Lien Act of 2010. This act requires a written commission agreement outlining the broker's services and compensation which entitles the broker to the lien. Only licensed brokers, not their employees or independent contractors, can file a commercial broker’s lien. Additionally, In most cases, the lien may need to be filed before the property is officially conveyed.
5. Conclusion
The broker's commission might seem like a cost, but their expertise often translates to significant savings. They can negotiate better deals, prevent costly mistakes, and free up your time, all of which can boost your bottom line. In short, a commercial real estate broker is your partner in navigating the complexities of the commercial real estate market, saving you time, money, and stress. By understanding the costs involved and finding the right broker, you can ensure a smooth and successful commercial real estate transaction.
This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a Real Estate Attorney, please Contact Thompson Legal at (734) 743-1646 to schedule a consultation.
