In every kind of business transaction, whether real estate or otherwise, the wise approach to increasing profitability is to reduce costs and risk. Risk is an interesting concept, in that even when avoided, it never really goes away. Risk remains...always, only in different forms and quantities, and in different hands. If one party in a two-party transaction reduces its risk, it is likely that the avoided risk simply transferred to the transactional opponent.

Transferrals of risk are a reasonable part of every negotiation, so long as such obligations are not unfairly thrust onto others. But, like investment in a risky stock or placing a risky bet, an increase in risk must be accompanied by additional opportunity as an offset. Otherwise, the risk receiving side of the transaction loses by virtue of taking on a bigger burden with no potential increase in profit or other benefits, and the transferring side of the transaction experiences a dramatic win as the result of paying no cost in exchange for minimizing its risk.

In lease transactions, commercial landlords must manage their risk in order to compete profitably and to sustain their own businesses. Transaction related cost and risk should be borne either by landlord, tenant, or both, depending on various considerations. However, lesser quality landlords will attempt to reduce their cost and risk by shifting some of those burdens not to tenants, their transactional opponents, but instead to tenant brokers. This usually comes in the form of an insistence by the landlord to:

• Lower commission rates
• Calculate commissions on phantom rent amounts and other discounts
• Calculate commissions on shorter lease terms that aren't applicable to the corresponding transaction
• Propose payments over periods of time
• Avoid or suspend payments or require paid commissions to be returned in the event of tenant default
• And, plenty of other reasons that serve only to unreasonably benefit landlords

Transactional cost and risk should only be borne by transactional participants. Transferring cost and risk to service providers, those who seek to perform a one-time service, collect their compensation and move-on, is unfair and inappropriate, especially when forced. Tenant brokers, like other service providers involved in various stages of real estate transactions do not belong in the chain of risk. Interestingly, landlords rarely offer tenant brokers an upside quid pro quo in exchange for a proposed increase in risk.