JLL Accused Of Inflating Rent At Nextdoor's San Francisco HQ

Neighborhood app Nextdoor is suing its leasing agent, JLL, over claims the brokerage firm never verified the square footage of its San Francisco headquarters in a bid to rake in a bigger commission.

The lawsuit, filed Nov. 8 in San Francisco Superior Court, accuses JLL and Executive Managing Director Derek Johnson of “serious dereliction of professional responsibilities” by falsely advertising the size of the building at 420 Taylor St. as nearly 116K SF, about 25% larger than the actual size, which it claims is just shy of 90K SF. 

The difference resulted in about $20M in additional rent payments over the duration of the lease, which was signed in November 2019, according to the lawsuit.

Nextdoor also claims JLL, landlord Seven Equity Group and its broker, CBRE, entered into a secret agreement that would line the landlord’s pockets while also resulting in larger commissions for the brokerage firms. JLL’s commission payment came out to just under $2M, according to the suit. 

“Those terms included a false rentable square footage figure for the premises which would require Nextdoor to pay the landlord substantially more rent each month for space that did not exist,” Nextdoor’s lawyers wrote in the suit. 

“Defendants’ acceptance of the contingent commission agreement without first disclosing it and obtaining Nextdoor’s advance consent to its terms created a conflict of interest in which defendants were doing the landlord’s bidding without Nextdoor’s knowledge or consent.” 

Nextdoor didn't immediately respond to Bisnow’s request for comment. JLL denied the allegations in an email to Bisnow.

“We firmly disagree with the baseless allegations brought forth by Nextdoor and are confident the facts of this case will prove that JLL acted with integrity and in the best interest of our client,” a spokesperson said.

Allegations of misconduct on the part of JLL come on the heels of a similar lawsuit filed against Newmark last year. In that complaint, nonprofit group OCA-Asian Pacific American Advocates accused the brokerage firm of failing to disclose details regarding the size of its former office building in Washington, D.C., resulting in a financial loss for OCA at the time of the building’s sale. 

A judge denied Newmark’s motion to dismiss the case in March. The defendant’s legal team said in an Oct. 18 filing the parties had reached an agreement that would be finalized in the coming weeks.

Nextdoor is asking that JLL be ordered to pay back its commission profits as well as other punitive damages and legal fees. It is also requesting an injunction that would prevent the firm from accepting undisclosed commissions in the future.