what is the definition of an override commission in a comm
replied 4 years ago.
Thanks for your question and good afternoon.
Commercial Real estate agents are typically paid a commission upon the signing of a lease. The commission is paid by the owner of the building and is typically paid one-half upon lease execution and one-half upon tenant occupancy. The commission is most often calculated as a percentage of the lease value and usually ranges between four and six percent. For example, if a tenant signs a 3-year lease for 2,000 square feet at $20 per SF per year, a 5% commission equals $6,000 (3 yrs x 2,000 SF x $20 x 5%).
To further complicate matters, the agent's Broker is the one that gets paid the commission. The Broker then pays a portion of the commission to the agent, depending on the agent's split. Commission splits range anywhere from 50/50 (most common) to 90/10 in favor of the agent.
You've probably noticed that every office building has a leasing agent. These agents are brokers hired by the landlords to fill vacant space. When a lease is signed, the agent is paid a commission for
representing the landlord. There is a brokerage commission in every deal.
If the tenant is represented by its own broker, though, the commission is paid to the tenant's broker. (The landlord's agent receives a small override.) This odd practice actually works to your benefit, since it allows you, the tenant, to determine whether the broker who is paid the commission represents the landlord or represents you. You incur no out-of-pocket cost for the services you receive from your tenant broker.
Over the long term, there is an apparent minimal cost since the landlord wants to recoup the agent's override. In a 10-year lease, this amounts to 1-2% of the rent. If your broker's services don't save you far more than this, you've appointed the wrong broker.
This is why all tenants who understand the real estate business are represented by their own brokers. It costs them nothing for the expertise and negotiating savvy provided by a professional who is accountable solely to them.
Here you look to the terms of the lease here to see what the amount of the over ride commission is and when it ends.Source: www.justanswer.com