When Should Commissions Be Paid? ... Last week's Dispatch, Should Brokers Earn Commissions on Lease Renewals? (Jan 13), generated a huge volume of comments. Below (and next week) I've excerpted highlights from a few of the e-mails that I received.

Consultant Ralph Spencer in Orlando, FL, traces the history of commission payments. "We both remember when brokers were paid monthly over the term of the lease as the rents were collected -- not up front. The price brokers pay for receiving commissions up front is that they may not get paid for renewals, expansions and, in the case of retail, overage rents. But what happens to the broker when the tenant’s lease is terminated early or the tenant defaults? Does the broker ever pay back the front end commission? I doubt it."

Greg Gauthier with Prudential Financial in Newark, NJ, offers a corporate real estate perspective. "Commissions should be paid to the broker who is representing the tenant at the time of renewal. If it is the same broker that originally introduced the tenant to the building, fine. However, in today's environment, corporate clients/tenants may be partnered with an entirely different brokerage firm than the one that put them in the space initially. The firm representing the client at the time of renewal is providing market data to the client and negotiating the terms of the renewal on behalf of the client. That broker is entitled to the commission."

Jeff Castell with Colliers Turley Martin Tucker in Indianapolis, IN, writes, "At the point in time when a lease expiration and renewal option event presents itself, tenants frequently do not have a sufficient understanding of current market conditions or the knowledge/experience to assess the relative value of exercising their renewal right vs. the other available alternatives, including renegotiating a new deal, relocating or even purchasing a property. Conversely, landlords are 'in the market' daily or engage a professional to represent their interests to insure prudent decisions for the benefit of the landlord."

Ross Way with Anderson Management in Wichita, KS, highlights the role of the property manager. "As a property manager for over 20 years, I have always received commissions on renewals from the landlords. It is my job to make sure the tenants renew by providing them with good services during their lease term. Landlords recognize the value that we provide and reward us with these commissions. We are always up-front with the brokers that we do not pay commissions on the renewals so there are no misunderstandings down the road."

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--Peter Pike