I’m not a landlord. I am not at risk of losing any money if a property doesn’t perform. I also don’t get to share in the profits when the property does well. So do I have an ethical responsibility to let a landlord know if I think the tenant I am presenting to him is less than stellar?
Ponder this: A tenant comes to you and asks to be represented in his search for new office space. Their current lease will be up in six months and they would like to sign you up as their exclusive tenant rep. You happen to have knowledge that this tenant was a constant problem for their current landlord; always in arrears, exceeding his parking allotment, messing up the common areas and restrooms, etc.
Now many of you will say, “Don’t accept the assignment,” which is a fair statement, and I would agree. This isn’t a client I would have any interest in representing. But we aren’t all so discriminating. Many brokers take this assignment with the full knowledge that if they are able to find this tenant office space, the tenant will most likely—eventually—breach at least some of the clauses of the lease.
Their rationale is that the landlord should perform his due diligence, assess the risk, and then determine the appropriate securitization of the lease with a personal guarantee, letter of credit, cash deposit, or deferred commissions. Thus, if the landlord is willing to accept the risk, why should the broker care?
Now, as an SIOR broker, I don’t have to read the Code of Ethics to figure out what to do. It’s simple: I avoid this tenant and move on. But if you were to decide to accept this tenant as a client (maybe it’s a slow month), you may want to review the SIOR Code of Ethics and/or your state licensing law as it might require you to disclose these facts about your tenant.
But wait…don’t you also have a Duty of Confidentiality to your client? See how messy this gets?
The easiest thing to do (and sometimes also the hardest) is to say no to business. I can tell you that one of the best feelings I have ever had was firing a client (after discovering unsavory details about their business practices). They were so stunned to learn that not everyone was as unethical as they are.
SIOR brokers are held to a strict code of ethics. It’s not only our duty to follow the code, but also our duty and responsibility to report violations of the code to the SIOR Professional Standards Committee. This is sometimes the toughest part. We rely on cooperation from brokers in our market as well as outside our market. Reporting violations is obviously something that must be done judiciously and after careful consideration. But it must be done. Ignoring violations makes your SIOR designation far less valuable; it calls into question the ethical standards of all members and makes the organization weaker overall. But having these codes of ethics is what helps to ensure SIOR brokers are the most ethical professionals in the industry.