Rent Coach: The broker didn't say there was a fee until AFTER the lease was signed. Do we have to pay?
Q. My parents-in-law live in Queens and decided to see what living in Manhattan is like for one year. They picked a broker and selected an apartment on the Upper East Side.
The broker never mentioned to them what fee she charges, and they assumed she was being compensated by the building. Right after signing the lease, the broker asks for a 15% fee. My parents-in-law are upset for obvious reasons. They did not sign any contract with the broker and fees were never disclosed. Do they have any obligation to pay her?
A. Based on the facts you shared, no. In order for a broker to collect a fee, some form of agreement needs to be reached by both the prospective tenant and the agent. At a minimum, it must provide for the amount of the fee to be collected in the event that the agent shows the client an apartment that they end up leasing. Such an arrangement is typically provided for in a fee agreement, which I have previously discussed.
Absent any conversation or written contract regarding broker’s fees, including who would be paying them (i.e. the tenant or the landlord) and the amount that would be paid, the agent will be unable to collect a fee after the lease signing.
That said, it sounds as though one of two things are going on here. Either the agent was very inexperienced or just plain sloppy; or your in-laws are leaving out some important facts.
The agent should have asked your in-laws to sign a fee agreement before ever viewing the apartment. Further, it’s hard to imagine how your parents-in-law were allowed to actually sign the lease before the broker’s fee was discussed. Brokers’ fees are to be paid at the lease signing, by certified check, along with any up front rent and security deposit. However, sometimes large management companies contact the tenant directly to facilitate a lease signing even when they are aware there is a broker (a practice brokerage firms should not tolerate and experienced brokers are able to navigate). In this event, the aforementioned fee agreement would be the only line of defense for the agent to ensure that they collect their fee.
Though the agent clearly did not protect herself, your in-laws are not without blame. How does one engage the services of another, never discuss how that person is to be paid, and then after the service is provided claim that they expected someone else was to pay the fee?
If they believed that the landlord would be paying (a scenario that happens in Manhattan infrequently), they should have confirmed that up front. Though their unwillingness to pay now is ethically questionable (to say the least), they would not be legally obligated to pay a fee absent an explicit agreement to do so.
Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.
Note: The information provided here is for informational purposes only. It should not be construed as legal advice and cannot substitute for the advice of a licensed professional applying their specialized knowledge to the particular circumstances of your case.
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