Tenant representation brokers are paid by landlords, creating an undisclosed conflict of interest that costs small businesses thousands in unfavorable lease terms

When a small business hires a tenant representation broker to find and negotiate office space, the broker's commission (typically 4-6% of total lease value) is paid by the landlord, not the tenant. This creates a direct financial incentive for the tenant rep to steer the client toward higher-rent spaces and longer lease terms, because both increase the commission. If no tenant broker is involved, the listing broker keeps the entire commission -- roughly double their usual share -- which incentivizes listing brokers to discourage tenants from hiring independent representation. Most small business tenants do not understand this commission structure because brokers market their services as 'free to the tenant.' Why it matters: When a small business tenant does not understand that their broker is financially incentivized by the landlord, they trust their broker's recommendation to sign a 7-year lease at $45/SF when a 3-year lease at $38/SF in the building next door would have been appropriate, so they are locked into a $300,000+ above-market commitment over the lease term, so when they need to downsize or relocate 18 months later, they face an early termination penalty or sublease at a loss, so the real estate cost that was supposed to be 8-10% of operating expenses balloons to 15-20%, so the business cuts headcount or product investment to cover rent, so growth stalls and the founder blames 'market conditions' rather than a lease they should never have signed. The structural root cause is that commercial real estate has resisted the transparency reforms that residential real estate underwent after the NAR settlement in 2024, because commercial transactions are considered business-to-business dealings where 'buyer beware' applies, and there is no regulatory body requiring commercial brokers to disclose their exact commission structure, dual agency status, or financial relationship with the landlord in a standardized, mandatory format.