Paid 2K commission to realtor for tenant stayed less than 3 month

22 Replies

My friend who is an agent listed my home for rent on the MLS. Another agent brought me a tenant and their tenant signed a lease. This tenant lasted less than 3 months and then eventually moved out after giving an eviction notice due to him not paying. The realtor that brought the tenant still received over 2k commission for a tenant that couldn't afford the rent. When I reviewed the application from the tenant provided by the realtor the information such as his income wasn't accurate.

My main question is do you think I should receive my money back from the realtor since she presented a tenant that couldn't pay and lied on the application?

Should I just request it back or should I involve an attorney right away?

thanks for the advice and any techniques to get some of the money back

Appreciate insight and time

The agent's job was essentially to bring you a tenant that you approve and sign a lease with. I don't see any legal recourse against them, since they did that.

something is rather uncertain,, review contract with realtor.. why did you accept a realtor. this is rather a huge commission,, you can list on MLS for rent and yet put no agents fee's paid.. and WHY your friend encouraged you to do this is PUZZLING.. they she also get commission for the listing....

It is the owner's responsibility to vet the tenant financially. No different than if a realtor brought you a buyer that was unable to get a loan, other than you paid the commission to the realtor for bringing a tenant. What kind of contract did you have that stipulated who got paid, when, why and how? 

@Jason Koehl I would be tempted to bring any contractual documents you had with the realtor (and your friend) together with the bad tenant's application form containing fictitious information and consult an attorney. Many will give you a first consultation free. You may have a case for negligence or lack of due diligence on the realtor's part. You would think that if they were going to charge the princely sum of $2k for a tenant they would make sure that the information provided was correct and that the tenant was solid. This realtor apparently did none of those things and charged you anyway. Sounds like a case for Small Claims Court to me. But I would try and run this by a legal eagle and get their take on things.

Originally posted by @Stephen E. :

@Jason Koehl I would be tempted to bring any contractual documents you had with the realtor (and your friend) together with the bad tenant's application form containing fictitious information and consult an attorney. Many will give you a first consultation free. You may have a case for negligence or lack of due diligence on the realtor's part. You would think that if they were going to charge the princely sum of $2k for a tenant they would make sure that the information provided was correct and that the tenant was solid. This realtor apparently did none of those things and charged you anyway. Sounds like a case for Small Claims Court to me. But I would try and run this by a legal eagle and get their take on things.

 For what reason ?  The agent does not qualify evaluate the potential tenant they just procure them.  The owner or property manager does the vetting.  Even if proper vetting was done, sometimes life events just happen.  Based on the information give so far, the procuring agent has done nothing wrong, thus earned the commission 

Thanks for everyone's comments and opinions. The contract in the lease regarding commission only stated "Landlord agrees to pay broker a commission of 1/2 rent for lease"

Originally the realtor tried to get a full month in addition: "Tenant would receive a 10% credit towards closing costs for each month of rent paid should they decide to purchase the home at market value at any during the lease and have first right of refusal at the commencement of the lease" Also the tenant realtor wanted 6% commission if tenant wants at any time to purchase the property at market value. Of course I didn't agree to this and said I'll give half a month of rent which I thought was standard.

This is a large high end house that was my primary residence and in an area that doesn't have any luxury rentals. Looking at a different industry some employee recruiters will sometimes get paid on a monthly basis or at milestones. I could possibly consider including milestone payments in the contract to avoid this risk again. I'm not sure if realtor would agree but sounds fair to me and if there client has no other houses as options I could possibly dictate this.

This was definitely a learning experience for me and appreciate everyone's insight and opinions.

@Greg H. I see you are listed as a broker. Surely they have some basic duties towards the individual concerned? Just what services were they offering for the very large sum of $2,000? This poster seems relatively new. Do you think there is no duty of care here?

If the agent did not process a credit, employment and background check on your behalf and you agreed to rent to this person and signed the lease, I don't see how you could go after the agent.  He/she earned the commission as soon as you signed the lease and the tenant paid their first month's rent and security deposit.  It is the landlord's responsibility to properly evaluate a prospect's credit and their ability to pay rent, unless you've hired a management company or the procuring agent to do it (and have a written agreement with them to do so).  

You signed the lease, so you agreed to lease to that person.  It is an unfortunate and expensive lesson learned. I understand your frustration but to blame the agent because you didn't properly qualify this person to rent your house (or contract someone to do so on your behalf), is unfair and getting the commission refunded will probably be unlikely. 

@Stephen E.

The other agent works for the buyer and the OP's friend works for him. The agent is required by law to represent their client in the the best way they can and to not say or do anything that would put their client in a bad light. So that other agent had the duty to the tenant (Who has now left after 3 months) not to the OP.

That is how agency works an agent represents a principal (Like lawyers). If he was working in the best interest of the OP then they would be breaking the law. it would be like a defense attorney going to the prosecuting attorney and saying "I'm not really sure his aliby is solid". That agent got their client the rental and as long as they did not lie or know about misinformation then they did the right thing.

So to answer your question: "Surely they have some basic duties towards the individual concerned? Just what services were they offering for the very large sum of $2,000? This poster seems relatively new. Do you think there is no duty of care here?"

No, if it is in my clients best interest to take advantage of the new landlords inexperience then yes I am required by law to do that.

Deciding on whether you accept the tenant application is on the landlord, so ultimately of the person ends up being a bad tenant then its on you..sorry. Unless the agent falsified info or didn't actually do the background checks, credit reports etc they claimed they did (I assume you looked at those right?), then its on you.

For 2k, its not likely worth the legal fight..chalk it up to a learning experience and move on...

What does the lease say about breaking it, could a clause be added (in the future) that makes tenant responsible for all commissions if they break the lease early? 

Originally posted by @Stephen E. :

@Greg H. I see you are listed as a broker. Surely they have some basic duties towards the individual concerned? Just what services were they offering for the very large sum of $2,000? This poster seems relatively new. Do you think there is no duty of care here?

 We do not have the full picture by the OP, but as I see it:

-Landlord hires friend who is an agent to lease the property. The "friend" represents the landlord and probably lists it in MLS. My guess is $2000 is 100% of one month's rent and was probably split between the agents. $2000 co-broker fee seems very high

-The prospective tenant uses a Leasing Agent who brings an application to the Landlord's broker along with an application fee.  The Landlord and/or Landlord's broker evaluates the tenant and approve the application.  All deposits and first month's rent are paid.  The tenant's agent has done their job and is entitled to their fee.  The tenant's agent represented the tenant and has no obligation to the seller and in no way guarantees the tenant

@Mike Cumbie @Greg H.   I can see that Realtors are all in agreement that one of their own owes no one anything but I beg to differ. This is a fundamentally bad bargain. The tenant in this instance is said to have supplied information on the application form that was not truthful. This may be fraud. At the least, the realtor has not delivered a reliable tenant who will go on to fulfill the obligations of tenancy. If this was my property and I had paid $2,000 for a tenant only to find that this person is not what they said they were I would be looking to the realtor to help make this right. Or there would be no repeat business of this nature. Fool me once...

@Stephen E.

The tenant supplied false data, sure could be fraud, charge a tenant with Fraud, not sure what precedent you want to start where couriers are liable for the information they provide. FedEx drivers and UPS guys are in for a world of trouble (Imagine ISP's... Oh MY). As far as the duties and responsibilities for delivering a tenant they are a "Ready, Willing and Able" buyer/renter. The standard was met when the OP accepted the person as their tenant. Sure if you feel changing the requirements and standards should happen then fine, lobby for that. Move the goal posts to a new place each second down if you like, but deciding that is your new standard doesn't make it so. 

As far as if they want to blame an agent they should blame their own, that is the person who is supposed to be vetting the applicants. The person who is supposed to be their guard who is protecting their wall. Blaming the guy on the other side who's job it is to get a soccer ball through the goalposts for doing his job that he is paid for is misguided. As far as the no repeat business yes, I agree there should be no repeat business for the friend who is an agent who he paid the 2,000 to (And consequently some went to the other agent).

If you want a REALTOR to make it right, I would suggest the friend who he signed a contract with. Although it's a joke that someone put an ad out in the local paper.... sold goods to a person.... and now wants to hold the paper liable because the person only made 2 credit card payments but that's your right..... Pretty soon car salesmen can be held liable for repossessed cars, furniture salesmen can be held liable when people stop paying on month 7, those poor cell phone salespeople........ 

@Mike Cumbie I think this is demonstrating why I do not retain realtors to find tenants. No one else will do as good as job as you will because their interests are unfortunately not aligned with yours as landlord. They are not looking out for you. Someone who claims $2,000 for supplying a bad tenant with no recourse is someone who has not delivered agreed value.

I should add that I have had perfectly fine dealings with my own realtor in buying and selling properties but there the agency relationships are a lot simpler - he either advises me on buying or lists a unit for sale. Finding tenants presents too much of a risk of finding the first breathing tenant and overlooking deficiencies, as the OP seems to have discovered.

I would chalk it up as a learning experience and not list w/ an agent not pay a commission to a tenants agent in the future. There is an inherent conflict of interest IMO - the agents are motivated to find 'a' tenant, they have little to no motivation to screen for a good tenant. 

Originally posted by @Stephen E. :

@Mike Cumbie @Greg H.  I can see that Realtors are all in agreement that one of their own owes no one anything but I beg to differ. This is a fundamentally bad bargain. The tenant in this instance is said to have supplied information on the application form that was not truthful. This may be fraud. At the least, the realtor has not delivered a reliable tenant who will go on to fulfill the obligations of tenancy. If this was my property and I had paid $2,000 for a tenant only to find that this person is not what they said they were I would be looking to the realtor to help make this right. Or there would be no repeat business of this nature. Fool me once...

 No information was given that the agent was part of any fraud.  Even though the agent represented the prospective tenant, they would have a duty to report such if they knew

Of course we all agree that this scenario turned out to be a bad deal.  What we do not know is: Was it bad screening by the landlord ? Was it fraud? Or was it just an unfortunate life event ? 

What industry are you in?  Should the Apple employee guarantee that my Ipad works for 10 years?  Should the car salesman guarantee that my car never breaks down ? 

This could be a failure to screen by the landlord for all we know.  FYI- Just because I am a broker does not mean I am a big fan of the industry.  I am just as hard on agent when I feel they are at fault

It sucks, but it sounds like you just had some bad luck. If the agent presented you some type of fraudulent documentation or fake pay stubs you may have some type of claim. If they handed you a standard form and the tenant lied about their income it isn't the realtors fault, it's your fault for not verifying the information. You need your own background, income, credit, and criminal check in place. Many websites offer this for a fee of less than $50.

The agent did their job finding the tenant and showing them your house and deserves the commission that you already agreed upon.

@Jason Koehl

Sounds like an inexpensive learning lesson.  As you've seen from the previous replies you will get differing opinions from the forum based on professional background, understandably so.

Any person holding an active license to sell/rent real estate has a fiduciary responsibility to their client, first & foremost.  However, there is a difference between retaining an agent (friend or not) to find you a warm blooded potential tenant, versus hiring someone to manage your property.  Generally, a property manager's duties include listing, showing, vetting & contracting a tenant (among other tasks); whereas an R/E agent is tasked with listing & procuring a list of potential tenants for YOU to qualify/screen.

I manage our family rental/lease portfolio, regardless of my R/E license.  At the end of the day because I choose to manage our portfolio I am responsible for screening, evaluating & contracting every tenant.  If I tasked that service to a PM firm they would be responsible.  Regardless of the screening & how a tenant looks on paper, sometimes they just don't work out.  I've had to evict what would be considered A+ tenants on paper (rental history & income).

No one on this forum knows the dynamics behind the deal you had with your agent/friend, & in the end it doesn't really matter.  To make things right for the relationship maybe they'll help you find another batch of potential tenants for your review, or maybe not.  If not let it go, consider it a good lesson, move on, do better next time & go make a crap load of money....knowing that at the end of the day you are responsible for your business, which admittedly is a pretty awesome feeling!

Will

Thanks everyone for your insight.  It was interesting to see everyone's opinion and analogies.  It was a learning lesson and I'll handle things differently in the future.  If a future tenant came from a realtor I would definitely try to pay them in stages so I'm not paying a large sum and then having a tenant move out after a couple months.  Of course some realtors may not like that but if they believe their tenant will stay they may be willing or may not have much of a choice if tenant only wants my property.