Does Your Client Know Your Commission?

Real Estate and the Law... Do you recognize the following paragraph as standard language that you might find in a tenant representation agreement?

Landlord and Tenant recognize [broker name] as the local cooperating broker that is representing the tenant in this transaction. In the event a transaction is completed, the Landlord will be responsible for paying [broker name] a market fee per a separate agreement.

What is a "market fee"? That's the question raised by a Dispatch reader:

"I get demands for fees ranging from 100% of non-cooperating broker fees to amounts 20% or more higher than what is perceived to be 'market.' ... Does the tenant know? ... Is the tenant aware of the compensation offered for one building versus another...?

"I see this in my market [Boston] and am curious what others see in different markets. ... This is an issue of who we as brokers really represent -- the tenant, the property owner or ourselves?"

Of course, brokerage firms cannot collectively agree upon standard fees for their market. The Federal Trade Commission (FTC) calls that a restraint of trade, and violators can go to jail.

So what's the difference between a "fixed fee" and a "market commission"? What is the tenant rep practice in your market? How would you address my reader's concerns?

Bonus Points... If anybody attends the public workshop on Competition Policy and the Real Estate Industry hosted by the FTC and Department of Justice in Washington, DC, on October 25, write me. "The workshop will focus on issues related to the competitiveness of the residential real estate industry, and will cover topics such as multiple listing services, online 'virtual office Web sites,' discount and limited-service brokers, and minimum-service requirements."