Where does AUSPL stand on the commission issue?

Whether postal lessors should pay commissions to the USPS’s representative (now, Jones, Lang LaSalle, or “JLL”) for negotiating leases remains one of the most intractable issues between the USPS and postal lessors.  The USPS has significantly reduced its internal staff and therefore relies on JLL for lease negotiations.  The USPS hopes to pay JLL for the services it renders by having lessors pay commissions to JLL.

The USPS claims that private sector commercial landlords commonly pay commissions to brokers who represent tenants.  However, such a claim is only partially accurate and is misleading.  While private sector landlords sometimes end up compensating tenant brokers, they normally do so indirectly (if at all).  That is, a private sector landlord will pay a commission to his or her own broker, and the landlord’s broker will share a part of that commission with the broker who brought the tenant to the deal.  And, no such commissions will normally be paid to either broker when the tenant was already in place and the transaction is merely a lease renewal.

Nevertheless, the USPS has no plans to alter its use of JLL for lease negotiations or to change its position about the necessity for lessors to pay commissions to JLL.  Lessors must decide for themselves whether to pay such commissions.  Lessors should consider various factors in making such a determination, including:

1. A lessor has no legal or other obligation to pay a commission to JLL. JLL is working only for the USPS in the transaction.  JLL is not representing the lessor’s interests in any way.  A lessor should not sign a commission agreement until the lessor has determined that the lessor is willing to pay a commission.  If a lessor signs a commission agreement, the lessor should ensure that the agreement reflects exactly the commission amount the lessor chooses to pay.
2. If a lessor determines that a commission or other fee is to be paid, the amount of the commission or fee is entirely negotiable. In almost all cases, the tenant (the USPS) will have been in place before a new lease is being negotiated, and JLL will therefore have done no work to “procure” the tenant.  That in itself suggests that any commission paid should be less than what a private sector tenant broker would receive for bringing a new tenant.
3. If a lessor chooses to compensate JLL, the lessor might consider a flat “transaction fee” rather than a commission that represents a percentage of total rents. For many small deals, lessors are including fees of $500 to $1,000 total.
4. If a lessor pays a commission or fee, the amount of the commission or fee should be added into the rent and paid back to the lessor over the life of the lease in question. The commission or fee is a cost to the lessor and should be recovered.  The USPS knows lessors will need to recover commissions/fees in that manner.
5. In determining whether to pay a commission or other fee, a lessor might consider whether JLL has added value to the negotiation process. Have JLL’s representatives been cordial and polite?  Has JLL negotiated in good faith and been forthcoming with information about rents being paid for comparable leased post offices?  Has JLL addressed concerns of the lessor in a professional and businesslike manner?  Or, has JLL refused to share information and address the lessor’s concerns, or resorted to threats that the USPS might move out?

In short, there is no single answer for a lessor about whether the lessor should pay JLL a commission or other fee in connection with a lease renewal.  Each situation will be unique, and each lessor will need to determine for himself or herself whether a commission or fee is appropriate.  No lessor is obligated to pay a commission or other fee, but some might choose to pay to help get a deal done.  However, in such cases, lessors should always seek to recover such commissions or fees through additional rent.