With a commercial property, there can be two authorities—leasing and managing. Take a look at the difference between the two.
In real estate speak, the term ‘Authority’ refers to contracts and the agreement between the property owner and the property manager.
These authorities cover things like engaging tenants, collecting rent, management fees and property upkeep.
With a residential property, there is just one authority/contract between the landlord and the property manager. For commercial property, things become more complicated.
Commercial property authorities explained
With a commercial property, there can be two authorities - Leasing and Managing.
Leasing Authority
With a commercial leasing authority, the landlord appoints the agent to lease their property. The terms of such an agreement may include the following:
Preferred minimum rent
Preferred leasing arrangement (e.g. no subleasing)
Leasing commission (including details about GST)
This authority will include definitions of ‘leasing’ and ‘leased’ so all parties are clear. It will also detail things like what happens if the property cannot be leased, who will collect the rent and how the funds will be distributed, and which costs are included as outgoings (e.g. rates, strata fees, etc).
A commercial leasing authority may also state conditions such as being void if the leasing manager’s Real Estate Institute of Victoria membership has expired.
By signing such an Authority, both parties agree to adhere to the conditions.
You can speak to a lawyer for a watertight leasing authority, or find a template online but it is advised to engage the services of a professional when it comes to contracts.
Make sure to review your leasing agreement in detail and have your clients do the same. It should also be updated regularly to avoid complications.
Management Authorities
Leasing relates to having a tenant in the property. A Management Authority extends to the management of the premises themselves.
This document will cover details such as:
Ensuring the building is maintained
Collection of rent and outgoings
Managing budgets and finances for the premises
Taking care of insurance
Being responsible for safety checks
Like with big residential complexes, property managers at commercial complexes take on responsibility for the day-to-day running of the building. This includes organising contractors and tradespeople, liaising with tenants and lot owners, and working with the executive committee to determine by-laws.
Obviously, a Management Authority will be different to a Leasing Authority as it includes areas beyond leasing a property and collecting rent.
As a real estate professional, taking on a management authority can make sense if you are motivated to provide an ongoing service for the commercial landlords you work with beyond the basic coming-and-going of tenants.
Why offer both?
If you’re a real estate professional who is interested in commercial property, you can become either a leasing or a managing agent.
However, you may find it is easier to take across-the-board responsibility and be in control of management as well as leasing. This will of course generate a higher income as you have more items on your to-do list. It also makes sense because it will mean you and your agency are highly familiar with the building, the tenants and their day-to-day requirements.
If you don’t want to do both, it may be easier for the landlord themselves to manage the property, allowing them to opt-out of using a commercial property manager. However, this would only be recommended for small-scale premises.
As a commercial property manager, if you offer fixed-term leasing rather than month to month, it will be easier to take on the role of both leasing and management for the premises. The benefit to you is that you’ll be able to include exit fees as part of the authority, which leads to a more stable commercial rent roll and, therefore, a more valuable one.
BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.