All you need to know about broker fees for your next rental

Amid the sky-high rents in Boston, and half of all renters being cost-burdened, paying a broker you did not hire is probably the last thing that you want to do. 

While there are ways to avoid paying the broker fee on your next rental, knowing the laws that govern what your landlord can charge you is always wise. 

Let’s dive in. 

“In Boston, there are lots of brokers who are operating at the landlord’s direction and are telling renters that there’s a broker fee for it, and they basically make the renters hire them,” said Douglas Quattrochi, executive director of MassLandlords, a not-for-profit trade association. 

According to state regulation 254 CMR 7.00, he said, brokers have to disclose upfront whether they are going to charge a fee. If the agent is going to charge a broker’s fee, the law states: “This written notice must be given by the real estate broker or salesperson at the first personal meeting between the broker or salesperson and a prospective tenant. It must be signed by the real estate broker or salesperson, contain the license number of such broker or salesperson, be signed by the prospective tenant and contain the date such notice was given by the broker or salesperson to the prospective tenant. Where a prospective tenant declines to sign such written notice the real estate broker or salesperson must note on such written notice the tenant’s name and the refusal to sign such notice.”

The same regulation also states that brokers cannot charge the prospective tenants a fee unless they find them a home.

Quattrochi also cited Chapter 186 Section 15B, which states that no landlord can take anything but the first month’s rent, last month’s rent, the cost of a new lock and key, and security deposit from the tenants at the beginning of the tenancy. “That basically means you can’t include a broker fee as part of the move-in money paid to the lessor.” 

Quattrochi said it is well within the rights of the renter to to refuse to pay the broker’s fee if they did not hire the broker. If tenants want to hire a broker to help them in their home search, they can and should discuss the terms separately.

But refusing to pay the fee for a landlord-hired broker can be an obstacle in negotiations.

“My best advice would be to do anything you need to do to get the apartment, because Boston is such a difficult rental market,” Quattorchi said.

He added that the renter can negotiate with the landlord about the broker fee — after securing the apartment.

“I think as a practical matter, a lot of people are squeamish and won’t raise that kind of claim, so it definitely is an area that seems to be having some problems,” Quattrochi said. 

Dedham-based attorney Alan J. Pransky, an expert in real estate law, said Massachusetts requires a broker to have a written contract with the customer in order to get a brokerage fee.

“It’s illegal for the landlord to require the tenant to pay that broker’s commission at the time they sign the lease,” Pransky said, but “I don’t think they can avoid the broker fee.”

Brokers should be paid for their services rendered. No one is arguing that they shouldn’t be.

To get around this law, brokers can ask prospective tenants who hire them to pay them upfront and refund the money if they fail to find a place for them, Pransky said. “Very few brokers appear to be doing that, as far as I can tell.”

He also said the landlord can pay the broker and get the money from the tenant, by raising the rent by a certain amount to compensate for the fee. “So, if the fee is $1,200, it’s an extra $100,” he said.

Theresa Hatton, CEO of the Massachusetts Association of Realtors, said that when it comes to broker fees, “the law is open to whatever contractual relationship clients want to get into with a brokerage.” 

She said there is no standard amount for the fees; it depends on the negotiation of the terms. 

As a tenant, having thorough knowledge of the laws and understanding your rights, can go a long way.

Hatton emphasized the need for tenants to understand that they have rights. “I know it’s a competitive market right now, but you still have legal protection, to protect your interest in your search to find housing,” she said.