Doing the Right Thing: Compensation for Lease Agreement

by Jan Steward on April 2, 2012

Fore Rent Sign

Image courtesy of Flickr user ishane

Every few days, a new request for mediation or arbitration is filed with AAR’s Professional Standards Department relating to a compensation offer in the MLS for a lease agreement.  REALTOR® A secures a tenant for REALTOR® B’s lease listing, thereby earning the compensation duly offered in the MLS. However, unlike a purchase contract wherein a title company issues commissions to the listing and selling sides of a transaction, the compensation for a lease agreement is paid directly by the listing brokerage who offered the rental for lease. But REALTOR® B does not pay REALTOR® A the promised compensation.

Often times the amount of compensation for a lease is $600 or less.  If REALTOR® A files for arbitration, in accordance with Article 17 of the National Association of REALTORS® Code of Ethics, REALTOR® A needs to deposit a $500 fee for filing. (REALTOR® B would also be required to deposit a $500 fee for the mandatory arbitration, and the prevailing party would receive a refund of the $500.) REALTOR® B is holding out on the payment to REALTOR® A, hoping that REALTOR® A is not willing or is unable to outlay an additional $500 to receive compensation of an equal or lesser amount.

Ethical Questions to Review:

  • Is it ethical not to pay a fellow agent compensation REALTOR® B has agreed to pay through a cooperative agreement in the MLS?
  • Is it viewed as unethical if the commission offered is under a certain amount, say $600 or $700?
  • Is REALTOR® B entitled to keep the compensation owed to another and disregard the earning of the compensation as inconsequential?

Another question which comes to mind is: If REALTOR®B were in REALTOR®A’s shoes, how would he view the obligation of compensation?  Taken from the preamble to the Code of Ethics and Standards of Practice: “REALTORS® can take no safer guide than that which has been handed down through the centuries, embodied in the Golden Rule, ‘Whatsoever ye would that others should do to you, do ye even so them.’”

In conclusion, REALTORS® are obligated to do the right thing.

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