There are scores of “tenant only” brokerage firms around the country and hundreds of brokers who have dedicated their careers to representing only tenants. Thousands of companies have chosen to work with these firms and brokers because they believe there is an irreconcilable conflict of interest when brokers attempt to represent both landlords and tenants in the same market.
There are no “landlord only” brokerage firms. That strikes me as remarkable. I can think of no other profession where only one side of an issue, or one side of an industry, is exclusively represented. Why is it that thousands of tenants, including some of the country`s most respected institutions, feel so strongly about the conflict of interest that they insist on using a tenant only firm, yet on the other side of the table, there is no market for landlord only brokerage firms? Why aren’t a similar number of landlords equally concerned about conflicts of interest and, therefore, insisting on using a firm that doesn’t represent tenants?
Not only do landlords not care if their brokers represent tenants, they actually insist that they do. When choosing a broker, what do landlords look for? Certainly they look for intelligent, conscientious and hard working brokers who can help promote their properties and provide them with information about the market. However, they want much more than that. They also want their brokers to bring tenant clients to their buildings and they hope to get an “inside track” on these tenants when it comes time to do a deal. One reason landlords spread their listing work among multiple brokerage firms is that it expands the universe of friendly tenants who will be introduced to their buildings. A broker who represented no tenants would not be able to provide this important value for landlords.
Why aren’t landlords concerned about the conflict of interest that exists when their broker brings a tenant client to one of their buildings? Perhaps it is because they understand human nature. Whereas most tenants may need their broker only once every five or 10 years, landlords know that they provide a steadier stream of work for brokers. If a broker is inclined to favor one client over another when a conflict arises, he certainly won’t turn his back on the more lucrative relationship.
People can dispute whether the conflict of interest created by dual agency (i.e., representing both sides of a transaction) is problematic. However, what cannot be disputed is that there is a large market for tenant only representation firms. Thousands of tenants around the country feel strongly enough about this conflict that they will not work with a broker who also represents landlords. They don’t want their broker’s loyalties to be compromised and they never want to have to worry if their broker is looking out for their best interests. The fact that there is absolutely no market for “landlord only” representation firms may constitute the greatest evidence of compromised loyalties in brokerage. Landlords want their brokers to represent both sides of a lease transaction and have absolutely no fear that their broker’s loyalties lie anywhere but on their side of the negotiating table.
For more information contact Glenn Blumenfeld