Get Management Agreements in Writing

Q. I’m a Texas practitioner who has managed a friend’s rental house since 1991. I just re-leased the property for three years. After I had deducted the first month’s rent for marketing and leasing the property, my friend accused me of taking his money.

The last two tenants’ leases were done the same way without any problem. For 10 years I’ve taken the first month’s rent and 10 percent per month for the duration of the lease. I’ve explained that to the owner, but he claims this is the first he’s heard of it. I haven’t signed an agreement with him.

I think it may be time to recommend someone else to handle the account, but since I’ve done a lot of work on the property, I don’t feel I should return my fee. What do you advise?

A. You’ve already pinpointed the problem: no written agreement. Article 9 of the NAR Code of Ethics requires that “agreements shall be in writing, and shall be in clear and understandable language expressing the specific terms, conditions, obligations, and commitments of the parties.” In addition, Standard of Practice 9-1 requires that the agreements be kept current through written extensions or amendments.

Concerns about your fee may be the least of your worries, because your friend could file an ethics complaint against you with your state commission for violating Article 9. Furthermore, you may be in violation of Texas law if you’ve been posting signs on the property. Texas law requires the written consent of a property owner for sign placement. In addition, there’s a general statutory provision in Texas that says any agreement longer than one year must be in writing.

If your friend takes you to court and you don’t have anything in writing, you may be allowed to keep the money for services rendered. However, you’d still face the possibility of an ethics hearing.

I strongly recommend that you immediately put the agreement with your friend in writing, with all the management details, including compensation, clearly spelled out. Then keep it up-to-date.

Q. What happens when a written offer is delivered and the listing agent sends back a counteroffer in which the commission split is less than that stated in the MLS? Is it a violation of either MLS policy or the Code of Ethics?

Does it make any difference if the listing agent thinks there may be a procuring cause issue with the cooperating broker?

A. Changing the compensation offered through the MLS during the presentation of an offer constitutes a violation of Article 3 of the Code of Ethics.

Compensation offered through the MLS is a contract, a promise to pay upon a certain occurrence. Article 3, Standard of Practice 3-2, requires that any change to the compensation offered through the MLS must be “timely communicated” to the other REALTOR® prior to the time such REALTOR® produces an offer to purchase.

That’s not to say a listing broker and a cooperating broker couldn’t mutually agree to alter the compensation arrangement, but it mustn’t be done unilaterally by either broker as it relates to the other’s compensation.

And it makes no difference if the listing agent thinks there may be a procuring cause claim. Procuring cause would be a matter decided through an arbitration hearing.