Planning for Your Departure When Changing Companies

Written by Posted On Wednesday, 28 June 2006 17:00

When you've been in the commercial real estate brokerage business long enough, you can almost count on changing companies one or more times throughout your career.

I grew up playing a lot of sports as a kid and a teenager in Santa Monica, California, and two of the guys I grew up playing with and going to school with both ended up played Major League Baseball for 14 years ... Tim Leary and Pete O'Brien.

I was fortunate to be invited as Tim's guest to play golf three years in a row at a tournament at Pebble Beach featuring Major League Baseball Players and their guests, and for me I really felt like a kid again being surrounded by and playing with all of these athletes who I greatly admired.

During one of the rounds Tim and I were paired with a young man who had just completed his first year of playing Major League Baseball, and Tim had just completed playing his 12th season at the time.

And when the young man was amazed at how many players Tim knew and exchanged greetings with during the day, compared with the relatively few players the young player actually knew himself he said, "Tim, how is it that you know so many players and I hardly know any of them?" And Tim responded with, "When you've played in the Major Leagues 12 years and have been traded to as many different teams as I have, it's really easy to get to know a lot of these people."

And such is the case with your career in commercial real estate also. When you change companies you get to know a lot more people simply because you've been surrounded by them in the offices you've worked in over the years. But problems can sometimes develop when leaving a company that you never planned on or ever imagined when you first joined the company.

Oftentimes brokerage company broker-agent agreements call for the company to be entitled to keep "reasonable" amounts of your normal net commissions on any transactions of yours that close after you leave the company. This is oftentimes written into broker-agent agreements based on the theory that you'll no longer actually be working on these deals after you leave the company, or at the minimum someone else from the old company will be working on these transactions along with you.

Now in reality, when an agent leaves a company he or she is often still the only person working on the transactions they generated before leaving the company all the way up through their closing. And no one in the agent's old brokerage company is doing any work on these deals at all. But sometimes the old brokerage company decides they're still entitled to reduce the commissions they'll pay the departing agent anyway after these deals close, and this is where bad blood can really begin to develop between an agent and their old firm.

(I've oftentimes wondered about the legalities of an agent continuing to work on transactions on behalf of their old brokerage firm while now having their license on board at the new company. But this still continues to be a normal practice in our industry today.)

I'm bringing all of this up because two of my coaching clients are currently experiencing these problems with the companies they used to work for. The companies are taking big bites out of the agents' normal commission splits on deals that are closing after the agents have left these firms, and the agents are very angry about it. And of course no one at the agents' old companies have done any work on these transactions at all to help them to close.

With this in mind I think it's a good idea to make sure all of this is handled in advance when you're negotiating your broker-salesperson agreement before you join a new firm. This will probably be relatively easy to do because the firm really wants you to come on board with them, and everyone's thinking you'll probably never leave the new company at that moment in time.

So you may want to negotiate a contract stating that if and when you leave the company, you'll continue working on any deals you have in progress, and your commission split on those deals will remain exactly the same as it always was when you were working with the company. Or, if you find it reasonable and think that you should be paid a reduced commission on these transactions after leaving the company, you may want to spell out the exact amount of commission reduction you'll be facing on these deals.

It's simply unfair to allow the company to utilize their own discretion in these matters, as sometimes the manager who has lost you as an agent can feel justified in keeping a greater share of your commissions from these transactions after you've gone. Sometimes it can be their way of compensating themselves for their displeasure at seeing you leave.

So do a little advance planning on this ahead of time, and if you ever end up leaving another company in the future, you'll be much happier that you negotiated these terms and conditions at the time you first joined the company.

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