Commercial Property Fees

Bandara

Hi all,

I am looking into assigning the lease to a food business and just wanted to get others experience of commercial letting fees ?

Business is young, profitable, has excellent future potential and is fitted out to a very high standard with top class equipment and furnishings, its a premium product - ie. I would imagine a relatively easy sale and I am expecting to be getting a very significant Key Money with all the F&Fs included in the sale. Reason for selling is very genuine, my credentials are impeccable within the industry, and prospective buyers should have no concerns whatsoever.

However I am being quoted an assignment/letting fee of "10% of the yearly rent of the unit" - in my mind this makes no sense, as obviously in this model the agent is guaranteed their fee regardless of how low or how high a figure they get me for the leasehold ? So if I'm the agent, its in their interest to try to get me to agree to put it on the market for as low a price as possible, so it sells immediately and they collect their fee regardless and with little or no work done. This is bananas imo.

Has anyone else come across this? I'm not unreasonable, happy to agree a fixed percentage of the price obtained with a bonus structure for different levels of price obtained over the baseline agreed amount.

Any experiences appreciated.
Thank you.

Darc19

That's what they are asking, so it's up to you to counter that and make it attractive so that if they achieve the price you want, the payment is higher than they are quoting and if it is substantially below, the fee is much smaller too.

I'd counter with 5% + sum a, b, c

Bandara

Darc19 wrote: »

That's what they are asking, so it's up to you to counter that and make it attractive so that if they achieve the price you want, the payment is higher than they are quoting and if it is substantially below, the fee is much smaller too.

I'd counter with 5% + sum a, b, c

Hi Darc

Thanks for the reply, with respect I’m more than capable of negotiating a lower deal and/or simply walking away from one that I’m not happy with. I am more interested in real world experiences from those with direct interaction with the current market standard rates to determine if figures quoted are inflated / unrealistic by the agent.

But thank you for your input, it is much appreciated.

Bandara

Anyone any experience ? Thank you.

dub3075

I let a unit out 2 years ago and was charged 10% of the yearly rent also. The unit was a shell so the tenant kitted the place out themselves if that makes any difference.

antoinolachtnai

Bandara wrote: »

Hi all,

I am looking into assigning the lease to a food business and just wanted to get others experience of commercial letting fees ?

Business is young, profitable, has excellent future potential and is fitted out to a very high standard with top class equipment and furnishings, its a premium product - ie. I would imagine a relatively easy sale and I am expecting to be getting a very significant Key Money with all the F&Fs included in the sale. Reason for selling is very genuine, my credentials are impeccable within the industry, and prospective buyers should have no concerns whatsoever.

However I am being quoted an assignment/letting fee of "10% of the yearly rent of the unit" - in my mind this makes no sense, as obviously in this model the agent is guaranteed their fee regardless of how low or how high a figure they get me for the leasehold ? So if I'm the agent, its in their interest to try to get me to agree to put it on the market for as low a price as possible, so it sells immediately and they collect their fee regardless and with little or no work done. This is bananas imo.

Has anyone else come across this? I'm not unreasonable, happy to agree a fixed percentage of the price obtained with a bonus structure for different levels of price obtained over the baseline agreed amount.

Any experiences appreciated.
Thank you.

1. Are you selling a business here or are you selling a leasehold with some odds and ends thrown in? If you are selling the former, then selling through an estate agent is not the way to go, certainly not the sort of agent who proposes the above. There seems to be an informal network of these sales. It's really a matter of knowing people who are interested, whilst at the same time not letting the word get out that you are selling the place (which will typically destabilise the business). It honestly sounds to me like you have the connections to do this.

2. I suppose this is going to amount to between 2000 and 5000 euros for the agent. I think this is sort of his 'basic level'. There is quite a lot of work involved in getting any long-term letting arrangement closed off. The agent can't really do this transaction for much less than this when all the costs are factored in (as I know you appreciate) and he can't make it contingent on the F+F being as good as you say they are. He is just an estate agent after all. If he is from a larger organization then I'd say the organisation just has a rate card and this is the price you pay for accessing the 'brand'. There are fancier arrangements possible, but they're not really for small transactions. They're for large landowners, who are the main customers of the agents. And they are focused on locations/real estate, not brand or business potential.

3. An option here might be to offer a separate bonus on top of the key money if you had an agent who was actually interested. I have never done this myself or really seen it done. The more I think about it, it isn't a good idea, especially for your circumstances.

Bandara

Hello antoinolachtnai

Thanks very much for taking the time to reply. Some great points well made.

I’m definitely going to rethink and reevaluate how to proceed. Input much appreciated as always.