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Don’t Assume: Protecting Your Commission in Commercial Real Estate Deals

By: David Liebman, SIOR, JD, James Hochman

Your co-authors recently closed a complicated suburban office building purchase in a Chicago suburb on behalf of a not-for-profit organization as buyer. Two days before closing, we received an unpleasant surprise. We learned that the listing broker—despite offering a 2.5% cooperating commission in his marketing materials—was quietly keeping an extra 1% fee for his firm, from what we assumed was a 5% total commission and in fact was a 6% fee. We had expected a 50/50 split. When we asked the listing broker why the split was not 50/50, he casually replied, “We do it all the time, especially when we incur additional expenses for the listing.” When pressed to identify what those extra expenses were in this case, he had no real answer. That experience reinforced a hard truth: if you don’t ask early and get it in writing, you risk losing money you have earned.

The purpose of the article is to advise brokers on best practices to protect your commissions and uphold transparency among all interested parties.

First, never assume the amount of the commission. Instead, ask the listing broker to confirm in writing the total commission being charged to the seller or landlord, and the commission splits between the listing and cooperating brokers. The available information may vary in different states. Under Illinois law, the listing or offering broker controls the offer of compensation to cooperating brokers. Brokers cannot unilaterally reduce a cooperating broker’s share after the offer is made and accepted. In our case, while the 2.5% offer was disclosed, we assumed a 50/50 split of a total 5% commission, highlighting the risk of assumption without confirmation.

Second, ask early and always confirm in writing. Always request written confirmation of total commission, co-op share, and any carve-outs (e.g., marketing costs, internal fees). Ideally, ask for a copy of the listing agreement or commission agreement before proceeding. Different states may or may not allow sharing of exclusive listing agreements. Illinois, for example, does not require a listing agreement to be shared with cooperating brokers.

Third, include commission terms in your engagement or LOI. Consider adding language to your representation agreement or the LOI that references your entitlement to a defined percentage or amount.

Lastly, don’t hesitate to escalate. If discrepancies arise, engage the principal parties (e.g., seller, managing broker) and cite the applicable disclosure laws or ethical standards.

Remember, brokers are fiduciaries who must advocate not only for their clients but also for their own fair compensation. Clear communication and written documentation are key to avoiding surprises and protecting relationships. Our recent experience was a reminder that even with standard disclosures, assumptions can cost us—so always clarify AND verify.



 

Media Contact
Alexis Fermanis SIOR Director of Communications
David Liebman, SIOR, JD
David Liebman, SIOR, JD
PowerPlay Real Estate Partners
dliebman@powerplayre.com

David Liebman, SIOR, JD, is the Founder and Managing Broker of PowerPlay Real Estate Partners, a Chicago-based specialty commercial real estate services firm.  A former corporate and real estate attorney, David leverages that experience with 34-plus years of CRE brokerage expertise to exclusively advise and represent industrial and office buyers, tenants and investors in acquisitions, leasing, lease renewals/restructuring, land purchases and build-to-suit transactions.  During his career, David has completed more than 500 transactions, valued at over $800 million.

James Hochman
James Hochman
Schain Banks Kenny & Schwartz
jhochman@schainbanks.com

Jim Hochman is a partner at Schain Banks Kenny & Schwartz law firm and freelance writer. Contact him at jhochman@schainbanks.com.