JLL’s Lost Case Over $800k Commission, Highlights that Conflict of Interest is Inherent in Dual Representation
JLL lost its case to recover $800k commission after failing to properly disclose it represented both sides in a deal to lease an office building in Downtown D.C. The case highlights the issue of dual representation —- when a firm represents both the tenant and the landlord —- calling into question the ability of dual brokers to provide impartial advice when representing opposing parties in a transaction.
The Case and Ruling
Brokerage firm JLL sued the landlord of an office building in Downtown D.C., an affiliate of S.C. Herman & Associates, in December 2020. The brokerage claimed that the landlord didn’t pay the firm the $781K commission on the deal and that it now owed the brokers $832K, including interest on the late payments.
In June 2016 JLL entered into a leasing agreement with S.C. Herman to lease the building in Downtown D.C. The brokerage also represented Spaces in the deal to occupy the top three floors in the building, signed in July 2018.
In Judge Florence Pan’s ruling, the brokerage firm didn’t follow the proper protocol for disclosing dual representation under a local law known as D.C. Brokerage Act. The law requires the disclosure of dual representation to be identified in the lease documents with emphasis such as bold lettering and a disclosure to make clear that the brokers may not share confidential information given by the clients.
The lease signed by Space mentioned JLL’s dual representation, but failed to put emphasis on it. It also didn’t include the confidential information language or the client signature. This, according to Judge Pan’s ruling, amounted to failure to comply with the requirements of the D.C. Brokerage Act. As a result this deemed the leasing agreement unenforceable, disabling JLL from recovering the commission.
The interesting takeaway from the case is that lawmakers clearly see dual representation as inherently suspect, as D.C. Brokerage Act’s requirements around disclosing this are so detailed and exacting.
Why Tenant-Only Representation Matters?
Often companies commissioned to find the best deal for tenants are also the same companies representing landlords. They will try to reassure their client that there’s no conflict of interest, but it’s difficult to be objective when representing both sides of the transactions.
As Judge Pan pointed out in his ruling, the D.C. Brokerage Law “reflects a recognition by lawmakers that dual representation is inherently suspect, due to the broker’s inescapable conflict of interest in representing opposing parties to a transaction”.
Tenant representation matters because a tenant-rep advisor will keep only your interests in mind and be fervent in pursuing your best interest in the negotiating process. On the other hand, those also working with landlords —- while they owe you a good standard of care —- will be incentivized to get you to sign an agreement on a property that they already represent in a deal that will also benefit the landlord.
Want to learn more about tenant-only representation in your region? Get in touch with us today and we’ll connect you with the right consultant.