Just over a year ago, a federal judge approved a $418 million settlement with the National Association of Realtors (NAR) that has had a significant impact on residential brokerage. According to the settlement, realtors can no longer advertise commissions for buyers’ agents on the multiple listings service (MLS), and buyers’ agents cannot begin tours until their clients sign written agreements that outline compensation structure.
Most commercial brokers do not use the MLS for listings, and, as the NAR website stresses, the new policies apply to residential, rather than commercial, transactions. Nevertheless, some commercial brokers are carefully monitoring the situation. They offered opinions on whether the settlement’s effects extend into the commercial arena and how brokers should prepare for or respond to them.
Clues From Germany
One could argue that Germany is the canary in the coal mine. Tobias Schultheiß, SIOR, managing partner of Blackbird Real Estate in Königstein, Germany, has seen how recent legislation on residential commissions has affected commercial brokerage in his country in “subtle, indirect ways.”
One law, enacted in June 2015, requires that residential landlords, rather than tenants, pay broker fees for leases. (A similar law called The FARE Act was just enacted in New York City.) The second law, which took effect in 2020, governs residential sales. It requires written agreements between homebuyers and brokers and stipulates that the commission percentage paid by the buyer cannot exceed that of the seller.
Although neither law applies to commercial transactions, Schultheiß reports that some commercial brokerages have nonetheless altered their business strategies and processes. For example, he says firms that handle both residential and commercial transactions are “reallocating resources toward commercial contracts where margins are less constrained,” and that some commercial firms are “placing greater emphasis on exclusive instructions, improving documentation, and adopting more transparent fee agreements.” He concludes: “The commercial arena retains its flexibility, but the lessons from residential reforms in terms of transparency, fairness, and compliance are increasingly shaping professional standards across the board.”
Settlement Effects in the U.S.
It appears that the U.S. is seeing comparable, subtle trends in commercial real estate following the NAR settlement. Jef Conn, SIOR, an office and industrial specialist at Coldwell Banker Commercial in Lubbock, Texas, believes the settlement has prompted conversations with clients about compensation structure. He views this as a “great opportunity” for clarification and transparency.
Kostas Stoilas, SIOR, founder and managing broker at Fortress Commercial Real Estate in Tampa, says conversations about commissions come up a bit more than they used to, but they are the same conversations as those before the settlement.
The commercial arena retains its flexibility, but the lessons from residential reforms in terms of transparency, fairness, and compliance are increasingly shaping professional standards across the board.
Some states, however, have implemented stricter measures in response to the NAR settlement, so the effects on commercial brokerage are stronger in consequence. California, which passed AB 2992 in September 2024, is one example. The law, which took effect on Jan. 1, 2025, requires written buyer/broker representation agreements for both residential and commercial properties.
For Tim Tran, SIOR, president of The Ivy Group in Fremont, California, AB 2992 has changed little for his brokerage, despite the inclusion of commercial transactions. “Even when the AB bill came out, it didn’t impact us that much because we have always been transparent, and always complete a written representation agreement before we start working with a client,” he states. And although he observes that co-listing with other companies has become more complicated, communication at the outset staves off any future misunderstandings.
More generally, brokers anticipate only a muted impact on the commercial arena, in part because commercial clients tend to be more sophisticated than residential sellers and buyers. Stoilas, for instance, deals primarily with institutions, high-net-worth individuals, and established companies who are well versed in legalities and payment structures. “They know how to protect themselves,” he says.
David Pennetta, SIOR, executive managing director of Cushman & Wakefield in Melville, New York, would agree. He points out that commercial deals “typically involve business entities or investors who are more familiar with transactional and contractual processes, whereas residential transactions involve individuals or families navigating the sale of a primary residence,” and the latter may be unfamiliar with the process.
In the opinion of Dan Spiegel, SIOR, senior vice president and managing director of Coldwell Banker Commercial in Chicago, the upshot of the settlement is that the residential business model is becoming more similar to the commercial model, “wherein agents have to be comfortable with explaining the fee structure and the value agents are providing on both sides of the transaction independent of one another.” For commercial brokers, that practice has been standard for years.
Responding to the Settlement
Although the settlement’s effects on the commercial realm have so far been minimal, experts suggest that brokers educate themselves on its facets. Conn recommends brokers visit the NAR website (www.facts.realtor) for details. Stoilas also encourages brokers to familiarize themselves with state-specific regulations.
Proactively clarifying fee structures early in client relationships is essential for setting expectations and building trust.
The need for education extends to colleagues. During weekly training sessions, Tran discusses the ins and outs of the settlement and of AB 2992 with his associates so that they, in turn, can discuss it with clients.
Some commercial brokers, like Conn, see the settlement as an opportunity. “Proactively clarifying fee structures early in client relationships is essential for setting expectations and building trust,” says Pennetta. “Commercial brokers should embrace this trend, making fee disclosures clearer and signaling their value proposition through professional upfront agreements.”
Furthermore, Spiegel reminds brokers that change is a given in commercial real estate. “Since I started in the industry, I have seen commission practices evolve with the demands and expectations of clients,” he observes. “Some of the change was driven by the role corporate and institutional clients asked of brokerage companies, and some changes simply evolved organically in a market.”
Although the NAR settlement has prompted only minimal change in the commercial sphere, the brokers poised for future success are the ones who learn what the settlement covers and prepare themselves for the questions their clients may ask. Such knowledgeable, responsive brokers are also the ones who earn well-deserved commissions.
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