The Real Estate Institute of Victoria has called for more transparency in the tenant advocate sector. It joins a number of large tenant advocate businesses calling for legislative accountability which would force advocates to disclose at the outset what its fee will be, and whether this will be paid by the building owner.
“There is a growing trend to use the services of a tenant representative in today’s commercial leasing market,” says Tenancy Matters tenant advocate director Chris Goodwin. “The majority of these advocates seek to be rewarded from the building owner, because the rewards are higher.”
“The arrangement can only be construed to be a conflict of interest where tenant advocates purport to represent the tenant.”
The conflict allows tenant advocates to negotiate for themselves lucrative fees from building owners, which are not required to be disclosed to the tenant.
It also allows advocates to with-hold from tenants, buildings where the owner will not pay a fee and the attraction to the advocate is much lower.
“Tenants should be mindful that not all buildings are tabled for their consideration because the tenant advocate is unable to secure a position with the building owner and in some cases buildings are adversely criticised due to the fact insufficient or no fee is available,” said Mr Goodwin.
Chairperson of the REIV commercial and industrial chapter, Matt Walsh agrees.
“One of the things that the law and the REIV requires is full disclosure of all commission arrangements. Receiving a commission other than from the person who has employed you is neither acting transparently nor is it considered to be in the best interests of the client.”
Jones Lang LaSalle regional director corporate solutions Michael Greene described the situation as highly questionable.
“We’re saying there needs to be transparency in the industry as a whole,” said Mr Greene. “Tenants need to know if they appoint an advocate, they will act in their best interests and will put up all the properties available to them regardless of whether they get a fee or not.”