When I was a corporate real estate manager, I was always worried about dual agency and the inherent conflicts of interest swirling around that particular issue. Whenever I would hire a real estate service provider, nagging thoughts would keep me awake at night: How do I know I’m not being steered towards a 'favored' building; how do I know my various real estate advisors aren’t sharing my confidential company information; and why is there such interest from certain landlords in my little piddling transaction?

Because dual agency can be clearly labeled, identified and disclosed, my real estate advisors often tried to put the issue to bed relatively early in the process. But dual agency made a poor bedmate and I still had many a sleepless night. The service providers I hired would try to reassure me that their knowledge of both sides of the deal was an advantage in representation and in negotiations. Frankly, I didn’t see the tenant’s advantage in that scenario. To me, it was like getting a stock recommendation from an investment advisor whose firm held a position in that particular security. Will the stock go up because it’s a good investment or because the investment advisor is positioning to get out and using my investment as a means to an end?

In the underlying real estate agreements, my service providers would mitigate and make provisions for potential conflicts of interest. But in each contract, the language implied that I was the one with the problem. The contract would indicate that conflict issues were not real, just a matter of "client perception." My advisors would tell me to relax--there was no overlap, no communication, and if necessary, they would be happy to sign a separate confidentiality agreement. Well, my pile of confidentiality agreements made for a lousy pillow and I continued to toss and turn at night.

Dual agency isn’t the only conflict factor in corporate real estate. For example, a real estate services firm that represents both landlords and tenants may use their history of success in filling a particular building with tenants as a means to get a future listing from the building owner. Your broker may convince you that the piece of dirt for your plant is a great buy and it’s owned by the church he or she attends. Does either example constitute a conflict? Does either example require disclosure? A conflict can exist when the person who is representing you has any interest in anything towards which your decision is oriented. Many of those types of conflict are not clearly identifiable and most go undisclosed.

If you are a corporate real estate director, the best way to handle your real estate decisions is to develop your own strategy and policy for dealing with conflict issues and stay true to it. When you do the right thing, everything else becomes background noise. And background noise will help you sleep better. I should know. I sleep fine these days. The views expressed in this article are the author’s own.

INDUSTRY QUICK LINKS Get Listed