Leasing & Renting
Leasing and Renting Definitions
1. GROSS LEASE:
A gross lease is one in which the landlord agrees to pay all charges against the property leased which are normally incurred through ownership.
2. NET OR FULL REPAIRING LEASE:
A net or full repairing lease is one in which the tenant assumes payment of all property charges, including the rents, taxes, insurance, all service maintenance and repairs.
3. PERCENTAGE LEASE:
A percentage lease is one in which the payment is measured in full, or in part, or is dependent upon the gross business in dollars, transacted by the tenant through the use of the property.
4. WHEN COMMISSION IS EARNED:
A commission on a lease is earned when, through the agency of the broker, the terms of the lease have been agreed upon as evidenced by a cash deposit or written agreement.
BUSINESS PROPERTIES: On month-to-month, summer, winter, or yearly tenancies, the rate of commissions shall be 10% of the total rental. The minimum commission shall be $50.00.
a. On leases up to 30 years the charge shall be not less than 10% of the rental for the first 5-year period or part thereof; 5% of the rental for the next 5-year period or part thereof; and 3% of the rental for the next 20-year period or part thereof.
b. Leases for 30 years or longer shall be treated as sales. If the lease is a net lease, the value of the property shall be the fair market value as of the date of execution of the lease, and the commission shall be the applicable rate for that type of property.
c. Net leases for under 30 years: The annual taxes and insurance on the property shall be added to the annual rental and the sum of these shall be used as the basis for computing the commission as provided in Paragraph 1 above.
d. On Percentage Leases With Minimum Guaranteed Rental: The broker shall charge the same commission that would be received if the minimum guaranteed rental were a fixed, straight rental for the full term of the lease. Furthermore, the broker shall charge a percentage commission on all additional rental paid to landlord by tenant during the term of the lease. The percentage to be charged on the additional rental for any given year of the lease, shall be the percentage applied to the minimum guaranteed rental for the same year. The commission is to be paid as the additional rentals are received by the landlord.
e. Straight Percentage Lease Without Minimum Guarantee: The broker shall charge a percentage commission on all rentals received in any lease year. The percentage to be charged on the excess rental for any lease year shall be the same percentage that was applied for that year to the rental on which the initial commission was computed, payable as payments are received by the landlord and an agreement covering these payments shall be made in writing at the time the lease is executed.
f. Leasing Fees – Agriculture Leases: The commission for leasing agricultural property shall not be less than 10% of the total rent. If the lease is on a crop-sharing basis, the commission shall be computed upon the cash rental value of the real property. If the Realtor elects to collect the commission when the crop-share is received by the landlord, the commission shall not be less than 10% of the landlord’s share of the gross rental.
g. Option To Renew Lease – Within Six Months:
1. If the lease gives the tenant an option to renew or extend the term, and the tenant exercises said option and/or remains in the premises or leaves it temporarily for six months or less and returns beyond the time specified in the original lease then the landlord shall pay the Realtor an additional leasing commission computed at the same rate that would have applied had the renewal period been a part of the original term.
2. If any lease for a shorter period than 5 years does not contain an option to renew, and the tenant renews his lease for a fixed time or remains in the premises on a month-to-month basis, the Realtor who negotiated the original lease shall be considered the procuring Realtor for the renewal or extension period up to a total term of 5 years, and the landlord shall pay said Realtor a leasing commission computed at the same rate as if the renewal period had been a part of the original term.
5. OPTION OR FIRST REFUSAL TO PURCHASE:
If a lease contains an option or first refusal to purchase, the Realtor shall collect the regular leasing commission and, in addition, shall have a written agreement from the landlord agreeing to pay full sales commission in the event the property is sold under the option or first refusal rights in the lease.
6. CANCELLATION CLAUSE IN LEASE:
If a lease contains a clause permitting cancellation by tenant without penalty, the Realtor may charge only for the non-cancelable term of the lease. If the tenant continues in possession then the period beyond the cancellation date shall be considered as a renewal or extension. If the lease contains a clause permitting cancellation by the landlord, the Realtor shall charge for the full term of the lease.
A Realtor shall handle each lease or sub-lease as a new transaction, and shall charge the established rental commission on total gross rent.