Effective August 1, renters looking to secure housing in Massachusetts no longer have to pay a mandatory broker’s fee unless they choose to hire one acting on their behalf. For brokers, leasing agents and landlords, it means a new way of doing business.
The change comes as part of a clarifying law that was added to the state budget bill passed in June. Before, many landlords in Massachusetts who hired a broker passed the fee on to the tenant, adding it to the required upfront move-in costs. The broker’s fee typically amounted to one month’s worth of rent. When added to the other usual fees — first month’s rent, last month’s and security deposit — it amounted to four month’s worth of rent due in order to sign a lease.
In a housing market where monthly rent for a one-bedroom averages over $3,500 per month, according to the apartment listing website Apartments.com, that fee requirement could cost prospective tenants well over $10,000 just to secure a place.
On the flipside, brokers and the agents who work with them may struggle to find work as a result of the new law, which now requires them to get paid directly from the landlords who hire them rather than securing payment as part of a lease signing.
“It’ll be interesting to see how it affects the market next year,” said Sophia Bruno, a leasing agent with the New York-based Prestige Property Solutions. Despite its New York contact address, the firm advertises as specializing in apartment rentals throughout Boston and its surrounding towns.
Bruno predicted that small landlords will opt to take it upon themselves to secure tenants, making less work for leasing agents and brokers.
“I mean, it’s definitely not going to make it worth driving into Boston every day,” Bruno said, pointing to her work expenses. “I mean, I have to pay tolls, I have to pay gas, I have to pay for my car, I have to pay for [advertising] these apartments online,” she said, adding that if an apartment hunter doesn’t rent a unit she shows them, that also costs her time.
Bruno, who also owns a gym in Canton, said she plans to respond to the new law by being more strategic about screening potential tenants and matching them to apartments when she’s working on behalf of a landlord.
Asked whether she could foresee an increase in renters hiring brokers directly for help, Bruno said: “That’s very unheard of.”
“I have never in my experience as an agent been contracted out to do that, and I don’t think anybody in my office has either,” she said pointing to high housing costs in the Boston market. “People don’t have all that money.”
In an advisory earlier this month, the Massachusetts Association of Realtors told members that one broker working on behalf of both a landlord and a prospective tenant will no longer be legal.
The advisory also cautioned members that they may no longer advertise apartments with a notation that the broker’s fee is to be paid by the tenant, and that “it will no longer be possible for the licensee to accept half of its fee from the landlord and then collect the balance from the tenant.”
Doug Quattrochi, executive director of the nonprofit trade association Mass Landlords, said that for lawful landlords who have avoided charging broker’s fees, the new law should not be disruptive.
“Since 1970, we’ve had 186 15B, which is a law that says a landlord can’t require or collect anything other than first month’s rent, last month’s rent, a security deposit equal to the first month rent, and the actual costs of changing the locks and issuing new keys,” he said. “So the whole thing that was happening, where lots of [renters], especially in Boston, were paying for broker’s fees, was non-compliant, and it was a question of lack of enforcement.”
Quattrochi warned, though, that the new law may mean higher rental prices.
“If a landlord was having a renter pay for the broker fee, they are absolutely within their rights under the new law to raise the rent, divide the broker fees by 12, and that’s your new monthly rent amount increase,” he said.
Mark Martinez, a housing attorney with the Mass Law Reform Institute, agreed that many interpreted the earlier law as a ban on charging a broker’s fee.
“It was a thing that ultimately would have needed to be litigated,” he told GBH News, describing the new law as one that “clarifies” what was already on the books. “So now, it is crystal clear, it is in the law. There’s really no ambiguity anymore.”
Martinez added that for tenants facing landlords who improperly require a broker’s fee, “this is a thing you can go to the Attorney General’s office about and you can file a complaint.”
An official with Attorney General Andrea Campbell’s office confirmed that tenants can file a consumer complaint with the Consumer Advocacy and Response Division. Campbell’s office has also issued an advisory about the changes.
“For tenants in Massachusetts, the only reason you should ever be paying a broker fee after August 1st is if you went and specifically hired the broker to work on your behalf. Other than that, tenants should not be paying a broker’s fee, whether it be directly to the broker or to landlord anymore,” Martinez said.
