How retail leasing commissions work in California

When a retail suite in Los Angeles or Orange County is leased through a broker, the commission is set by the listing agreement the owner signed months earlier, and sometimes by the brokerage paragraphs in the lease itself. This guide is general information, not legal advice.

How the commission is calculated

Most commercial leasing commissions are a percentage of the total base rent over the initial lease term. A Southern California brokerage wrote in December 2025 that lease commissions "typically range from 4% to 6%," calculated on the total base rent over the entire term. A Los Angeles area brokerage gives the same 4% to 6% range for California. Both articles cover commercial property in general, and the 2025 one leans toward industrial. I did not find a published survey of retail rates for Los Angeles or Orange County.

The AIR CRE standard lease forms carry brokerage paragraphs of their own (1.10 and 15) that can set a fee and address options and a sale of the property. The parties can strike or change them. In an AIR multi-tenant lease for a Los Angeles building filed with the SEC in February 2026, both paragraphs are struck, so the lease itself sets no commission.

Check what counts as rent. The December 2025 article works from total base rent, but the 2024 article defines total rent as the sum of all rent payments over the term, and the Michigan schedule ("total rent") and the Santa Ana agreement ("total lease consideration") use broader terms, so ask whether NNN charges are in or out. Free rent matters too. One published landlord schedule says commissions are not due for rent-free periods.

Stepped and capped schedules

Some schedules pay a lower percentage in the later years of a long lease. A 2022 analysis by Oregon's Legislative Fiscal Office described industry-standard lease commissions as "4-7% of the full value of the first five years of the lease plus a reduced percentage for the next five years." Others cap the years that count. A commission schedule the State of Michigan posts for landlords leasing to the state pays 5% of total rent but counts only the first 10 years of a longer lease. I found no data on how common either approach is in Los Angeles or Orange County.

Flat fees per square foot

A Massachusetts landlord's 2012 schedule offered brokers a flat fee of $1.00 per square foot for each year of the initial term, up to five years. I found no Los Angeles or Orange County source on how often retail commissions are set this way.

A worked example

The numbers below are illustrative, not a quote for any property: a 1,500 SF suite on a 5-year lease, base rent of $3.00 per SF per month NNN in year 1 with 3% annual increases, a 5% commission, and a 50/50 split with a tenant's broker.

If the lease gave three months of free rent and the agreement left free rent out of the base, total base rent would drop by $13,500 to $273,193.34, and the commission to $13,659.67. If the same lease ran 10 years, with the same 3% increases, under an illustrative stepped schedule of 5% on years 1 to 5 and 2.5% on years 6 to 10, the commission would be $22,643.57, against $30,952.47 at a flat 5% on all ten years.

Who pays and how the fee is split

Both brokerage articles say the landlord usually pays, and the Oregon analysis notes that where the state is the tenant, "the landlord always pays any broker commission." When the tenant has its own broker, the landlord's commission is usually shared rather than doubled. The Oregon report says that if both parties have a broker the commission is split, and "the total commission amount paid typically does not change." The December 2025 article puts the split at "often 50/50."

An Orange County public record shows a proposed rate and the final one side by side. In 2011 a broker proposed to lease a 5,200 SF ground-floor suite at the Santa Ana Regional Transportation Center for 6% of total lease consideration, with half to any cooperating broker. The agreement, which the Santa Ana City Council approved on August 6, 2012 (minutes), set the commission at 5%.

For a lease longer than one year, California's agency disclosure rules treat the landlord as a "seller" and the new leasehold as a "sale" (Civil Code 2079.13). Under section 2079.14, your listing broker must give you the statutory disclosure form before you sign the listing agreement and get your signed acknowledgment. If one brokerage ends up representing both you and the tenant, B&P 10176(d) makes acting for more than one party without the knowledge or consent of all of them a ground for discipline, so settle in advance what the fee is in that case.

Pay the brokerage, not the individual agent. Under B&P 10137, a salesperson may accept compensation for licensed work only from the broker they are licensed under.

When it is earned and when it is paid

Payment timing depends on the agreement. The December 2025 article says the commission is usually paid once the lease is executed. A leasing agreement a retail REIT filed with the SEC in 2014 made commissions "fully earned as of the date the lease is executed," but allowed, "if customary for such geographic area," half at execution and half at the earlier of the tenant's opening for business or the rent commencement date. The Michigan schedule pays half at signing and half at commencement, no later than six months after execution. Santa Ana's agreement paid half within 30 days of execution and the rest in 24 monthly installments, and had the broker re-market the space at no charge if the tenant did not complete the term.

Earned and payable are different dates. If the fee is earned at signing and the tenant never opens, the second installment may still be owed. If you want it to depend on the tenant opening or paying rent, the agreement has to say so.

Renewals, options, extensions and expansions

Whether a renewal earns a commission depends on the agreement, and the lease form can add obligations of its own. If the lease you plan to use has a brokerage paragraph, such as paragraph 15 of the AIR forms, compare it with your listing agreement before you sign.

The Michigan schedule charges its rate on the added rent when a lease that contains a renewal or expansion option is renewed, extended or expanded, payable when the extended term starts or the space is occupied. The Massachusetts landlord's schedule says it does not typically pay commissions on renewals, extensions or expansions with existing tenants. Agree on renewals, options and expansions in writing at the start.

When the property sells

Unpaid installments, and commissions on options a tenant has not exercised yet, can follow the property. The Michigan schedule binds the owner's "heirs, successors and assignees" and keeps the selling owner liable unless the buyer assumes the commissions in writing. The 2014 REIT agreement ends the obligation for future leasing fees on a sale, but not for fees "earned, payable or due" by then.

Whether a particular buyer is bound turns on the documents, so the purchase agreement should say who pays installments still owed on signed leases and commissions on future option exercises. If you are buying, ask the seller for every commission agreement and a schedule of unpaid amounts.

California rules

Commissions are negotiable

California's "not fixed by law" notice in B&P 10147.5 applies only to agreements for the sale or purchase of residential property with no more than four units, or of a mobilehome. A retail lease listing does not need it. I found no California statute that sets a leasing commission rate. In a December 2024 advisory about purchase transactions, the DRE told licensees that "Commissions are fully negotiable under California law" and that they should not claim there is a standard rate.

A broker license is required

B&P 10131(b) defines a real estate broker to include anyone who, for compensation and for another, does or negotiates to do any of several acts, including leasing property ("leases or rents or offers to lease or rent") and soliciting prospective tenants. Under B&P 10136, a person acting as a broker cannot sue to collect compensation without alleging and proving they were licensed when the claim arose. You can check a license on the DRE's public license lookup.

The agreement must be in writing

Civil Code 1624(a)(4) makes the following invalid unless it, or a note or memorandum of it, is in writing and signed by the party to be charged or that party's agent: "An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a longer period than one year, or to procure, introduce, or find a purchaser or seller of real estate or a lessee or lessor of real estate where the lease is for a longer period than one year, for compensation or a commission." Most retail leases run longer than a year, so a spoken promise to pay a commission on one does not meet the statute.

Exclusive listings need an end date

Under B&P 10176(f), a licensee can be disciplined for claiming a commission under an exclusive agreement that lacks "a definite, specified date of final and complete termination."

What to negotiate in a listing agreement

• The rate and the base. Base rent only, or NNN charges too. Whether free rent and percentage rent count. Any step-down for later years or cap on long terms.
• Cooperating brokers. Whether the rate changes when a tenant broker is involved, and what the cooperating broker receives.
• One brokerage on both sides. The fee when your broker's firm also represents the tenant.
• Earned and paid. When the fee is earned, when each installment is due, and what happens if the tenant never opens or pays rent.
• Renewals and options. Whether a commission is owed on option exercises, renewals negotiated outside an option, expansions, relocations within the center and holdovers, and at what rate.
• Term and termination. A definite end date, your right to terminate, and on how much notice.
• The tail. How long after the agreement ends a commission is still owed, limited to prospects on a named list the broker delivers. The Santa Ana agreement allowed 360 days after a termination, with the list due within 30 days. The 2014 REIT agreement used 180 days with the list due within 10 days.
• Exclusions. Existing tenants and any prospect you were already talking to before you signed.
• A sale of the property. Who pays unpaid installments and future option commissions, and whether the buyer must assume them in writing.
• The lease form. How the brokerage paragraphs of the lease you plan to use, such as AIR paragraphs 1.10 and 15, line up with the listing agreement.