Diary of a Whimpy REALTOR
I had received this email from a Broker in my area.
Don't Make the Same Mistake I Did!
(A quick note for Lehigh Valley Brokers and Agents)
Hi Everyone,
We were shocked recently by a fine from the state for the way a rental commission was paid, and I wanted to take a few minutes and share it with you because I believe many of you may be making the EXACT SAME MISTAKE that we did, and I don't want to see anyone else fined for this.
What did we do? On a co-op lease with a local Re/Max agent, the tenant wrote a check for the first month's rent to us (as payment for the commission on behalf of the owner) and a check for one month's security deposit to the owner. We then paid half of the month's rent to Re/Max and mailed the security deposit to the landlord. I've seen this done by Realtors throughout the Valley and NEVER thought it was a problem. The landlord argued, however, that ALL money should have been paid to the landlord, including the first month's rent, and we should have billed the landlord for our fee.
The State agreed with the landlord, because even though we DID have the right to charge the fee, the lease agreement was between the tenant and landlord and the fact that we had the tenant write one month to us invalidated the lease agreement. Have you or your firm ever had a tenant write 2 checks? One for security deposit to the landlord and one for the first month's rent to your office? This can cause you to be fined (and cause you to be found guilty of bad faith, etc etc).
I don't want to make your head explode, but basically, the Lease Contract is a contract between the Tenant and the Landlord with the Realtor facilitating the transaction.
Under clause 3 - the lease that WE ALL use states "Rental Payments: Payable to:" (example below) If we, as Realtors, are MANAGING the property, those payments go to the Realtor. If payments go to the landlord, and the landlord's name is on that line, then ALL payments should go to the landlord (including the first month's rent) and although the landlord owes us commission, the checks should still be written to the landlord. I know that sounds odd, ("But I have a listing contract" you might say), but the lease states all payments must go to the party on that line, regardless of what your listing states.
One way to correct this, until the state revises the form, may be to write an addendum to the lease where the landlord authorizes the Realtor to keep the first month's rent (you may want to run that by your own council. I am not an attorney). The other is to bill the landlord and hope you get paid. I actually hired PAR's attorney, James Goldsmith, when this first came up. I argued that I really thought I had done it correctly. I have asked Mr. Goldsmith to look into changing the lease form, since he works with the forms committee, and he has asked me to submit my request to the members of the form's committee.
In 27 years, I have never been fined (and hopefully I'll go through another 27 years without one!). I try very hard to make sure everything we do is done right. Of course, I'm not perfect - no one is, but I don't want anyone else to go through the same situation that I just faced.
I hope you all have a great year and pray that more buyer's realize NOW is the time to buy!
Have a great year!
Loren Keim
Broker
Century 21 Keim Realtors
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