In the context of a commercial lease (or the sale and purchase of real estate), a co-brokerage agreement is where two (or more) real estate brokerage firms generally agree in writing as to the following:
- Which broker is the listing agent of the premises on behalf of the landlord (or seller).
- The listing agent and co-broker are the sole brokers who brought about the leasing (or sale).
- The listing agent and co-broker are the sole brokers entitled to receive a commission, and the method and the manner under which they will each be paid (and commission split, e.g., 50/50 or 60/40).
- The terms and conditions of the co-brokerage agreement that govern when payments are received. For example:
Notwithstanding anything contained in this agreement to the contrary, no commission installment shall be earned and become due and payable if, at the time such commission installment would otherwise become due and payable, Tenant is in default under any of the terms of the Lease (in which case payment of such installment shall be deferred until all such defaults are fully cured), and if the Lease shall be terminated in connection with any default by Tenant under the Lease, or with any other event of default under the Lease, neither Broker/Listing Agent nor Co-Broker shall be entitled to any further commission installment.
- Whether or not the brokers will be entitled to a commission upon a renewal or expansion of the space (or for a purchase of the building by the tenant of which the leased space is part of). For example:
In addition, in the event the Lease shall be renewed or extended by agreement, by operation of law or otherwise, or the building by the Tenant of which the leased space is part of, unless otherwise agreed to by separate written agreement, no further commission or other compensation shall be payable to Broker/Listing Agent or Co-Broker for such renewal.
- Confirmation by the broker/listing agent and co-broker that they are licensed in the state where the property is located, and confirmation that they have the authority to sign the co-brokerage agreement.
- The sharing by the broker/listing agent and co-broker in any out-of-pocket fees, costs and expenses in the collection of the commission and filing any liens against the premises as permitted by law according to the commission split percentages, and the conditions under which such liens may be filed. For example:
The right, if any, which Broker/Listing Agent and/or Co-Broker may now or hereafter have to file a lien with respect to any amount due shall not arise or be exercised unless and until (a) Owner defaults in making any payment due Broker/Listing Agent or Co-Broker pursuant to the terms of this Agreement and (b) such default is not cured by Owner within sixty (60) days after Owner or receives written notice of such default from Broker/Listing Agent and/or Co-Broker, sent by certified mail, RRR.
- Outline rights and remedies in regard to potential litigation disputes between the parties. For example:
In the event any litigation arises out of any dispute between Broker/Listing Agent and Co-Broker under this Agreement, the parties hereto agree that the losing party shall reimburse the prevailing party for its reasonable out-of-pocket attorneys’ fees and disbursements incurred in connection with said attorneys’ representation of the prevailing party in such dispute. Co-Broker agrees that in the event it becomes necessary to pursue collection against Owner for payment of the Commission, that Co-Broker’s rights shall be co-extensive and in no event greater than Broker/Listing Agent’s rights and remedies.
- Provide for the broker/listing agent and co-broker representations and indemnities. For example:
Broker/Listing Agent and Co-Broker each individually represent that they have not dealt with any other broker or other person or entity (other than each other) which may be entitled or claim entitlement to a commission or similar compensation in connection with the premises. Limited to their own acts, Broker/Listing Agent and Co-Broker shall individually indemnify and hold each other, Tenant, and Owner, their respective members, officers, directors, shareholders, employees, agents and independent contractors harmless from and against any and all damages, losses, liabilities, commissions, claims, lawsuits, judgments, costs and expenses, including reasonable attorneys’ fees, disbursements, court or arbitration costs which Broker/Listing Agent and Co-Broker, Owner, Tenant, or any of the aforesaid parties may incur by reason of any broker or person, corporation or other entity claiming to have dealt with or through Broker/Listing Agent and Co-Broker respectively claiming a commission, fee or other similar compensation arising out of or in connection with the leasing of the Premises to Tenant. Any amount required to be paid by Broker/Listing Agent and Co-Broker under this paragraph shall be limited to the Commission each received under this Agreement. The provisions of this paragraph shall survive termination of this Agreement.