Ask an Expert

I paid a broker's fee to a broker who also does jobs for the building. Was he entitled to the fee?

By Alanna Schubach | January 24, 2022 - 9:30AM 

Licensed real estate professionals can collect a broker's fee when they do other types of work for a building. However, a broker or salesperson affiliated with the owner of a rent-stabilized apartment would not be able to collect a fee.

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Question:

I paid a broker's fee to a broker that also does other types of work for the building, like helping with maintenance and handling tenant complaints. Is that allowed? Could I get the fee refunded?

Answer:

As long as the broker is properly licensed, he hasn't done anything illegal and is entitled to his fee, our experts say. 

First things first: Only licensed real estate brokers or agents (or salespersons) can collect a broker fee—the terminology can vary depending on the level of training. You can look up the broker's licensing information. So someone who just does odd jobs around a building and is not a licensed real estate broker or agent would not be able to collect a fee.

So to be clear, "a broker fee is a fee paid to a licensed real estate salesperson who works under a licensed real estate broker or is a licensed real estate broker themselves," says Deanna Kory, a broker with Corcoran. "No one else can collect a broker fee." 

Licensed brokers are legally permitted to perform other services for buildings they're showing to renters.

"It is not unusual for a managing agent or someone who is servicing a building to receive brokerage fees for rentals," says Steven Wagner, a co-op and condo attorney at Wagner, Berkow & Brandt (FYI, a Brick sponsor). "There are rules requiring a broker to be licensed, but this relates to the ability of the broker or salesperson to collect fees and the standards to which they are held."

However, if the apartment you are renting is rent stabilized, you might be entitled to a refund of the fee.

"The prohibition on collecting brokerage fees arises when the apartment is subject to rent stabilization. If the broker or salesperson is affiliated with the owner, as seems to be the case, collecting a brokerage fee could be viewed as an impermissible overcharge," Wagner says. "The rent and fees charged by an owner of an rent-stabilized apartment are regulated, and do not include brokerage fees for renting the apartment." 

If you suspect the broker was not legally entitled to the fee you paid, start by sending a letter to the broker and building owner demanding that the fee be repaid. You can also file a complaint with the state department of licensing services. And if your apartment is rent stabilized, you can file an overcharge complaint with DHCR.


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