By Joseph Autilio Executive Director, Massachusetts Board of Registration of Real Estate Brokers and Salespersons
Q. Can I keep a fee for services in a rental transaction?
A. This is an occasional source of complaint to the real estate board and a good opportunity to point out what the Board’s regulations say on this subject. This issue arises when a real estate agent receives funds from a prospective tenant towards the rental of an apartment. Typically those funds include a first month’s rent, a security deposit equal to a first month’s rent and sometimes a small fee for a credit check. Also, typically, the prospective tenant submits a rental application for a particular apartment along with the payment of the aforementioned fee. That rental application contemplates the acceptance of the prospective tenant by the landlord and the execution of a written leasehold agreement. The Board usually gets involved when, for one reason or another, no leasehold agreement is executed and no tenancy is created. In such situations real estate agents sometimes claim to be entitled to keep a fee for their assistance to the prospective tenant which is usually a portion of one month’s rent or one month’s rent. In these situations, agents often argue that the prospective tenant backed away from a potential deal after the rental application was, arguably, accepted by the landlord though the contemplated lease was not executed.
While the scenario described herein can and does vary depending
on the complaint, one thing that is constant is that no tenancy has been created. In other words, no lease was executed by the prospective tenant and landlord, nor was any possession of the apartment taken by the prospective tenant. In view of this, what the agent is essentially claiming is that they should be paid for their attempt to find the prospective tenant an apartment. The Board is unaware of any inability for agents and prospective tenants to agree on payment in these situations but without such an agreement the agent’s fee claim is tenuous.
To protect consumers, the Board enacted its apartment rental fee notification which provides, in pertinent part, that an agent who is seeking a fee for his services, even where no tenancy is created, must provide the prospective tenant with written notice that states this and, among other things, obtain the signature of such prospective tenant (See: 254 CMR 7:00). Sometimes agents fail to provide any written notice and yet claim a fee for their services or they provide a contradictory notice, meaning it’s not clear that the tenant will be required to pay a fee where no tenancy is created and this, of course, fails to satisfy the written notice requirement of the regulation.
Q. Do I need to have a bond if my license is “inactive”?
A. Yes. The relevant licensing law requires a current bond for inactive licensees. While such licensees cannot work generally, they can earn a referral fee payable to them by an “active” licensed broker for referrals made to such active broker.