Last month, a national real estate website, published an article by Carrie Rossenfeld discussing a recently passed California Bill regarding agency disclosure requirements for commercial real estate transactions. The premise of SB 1171 is as follows, “Effective January 1, 2015, commercial real estate salespersons and brokers will need to provide, in writing, their exact proposed agency role in the future transaction. In addition, this disclosure will need to be signed by the potential client prior to moving forward with any representation.”

How will this affect you as a tenant leasing space? Let’s answer that question using an hypothetical example. You’re current lease is a about to expire and you will probably stay at your current location, but you want to see what else might be available. What seems like the path of least resistance is to contact the agent whose name is all over your building, on a sign out front, on the lobby directory and maybe even in the elevator. That individual might have even contacted you recently to say your lease is expiring soon. This person is the listing agent who is hired by the owner of your building to market space and find tenants for their client (the building owner).

The new law will require that individual to state in writing their agency relationship with the landlord. They represent the landlord’s interests which is to get you to renew your lease at their building in order to maintain or increase occupancy. Let’s take the example a little further, say the listing agent is good and represents two more buildings in the area. Their contractual obligation is to find tenants for their landlord clients. In any of these scenarios it will be disclosed the agent’s relationship and fiduciary responsibility is to the landlord(s). As such it is difficult to imagine a situation where you as a tenant should feel comfortable that your best interests are the priority of that particular agent. Continue reading