Did you recently lease a property and were asked to make one check (typically the security deposit or first month's rent) payable to the listing broker? If so, you may want to consult an attorney.
All lease payments made by a tenant should be made payable to the landlord (or Property Manager) – then landlord should pay the listing broker, per the lease listing agreement – and then the listing broker should pay the other broker, per the Agreement between Brokers form. See the flow chart below for further understanding.
Some real estate offices have the tenant make a check payable to the listing broker, in lieu of a security deposit or rent. Nothing could be more incorrect. If this is done, there is no record of a security deposit or rent ever being made to the landlord –there is no contractual agreement stating that a tenant pays the listing broker –and the listing broker could be accused of commingling of funds.
The only exception would be if the property is being managed by a property management company. In this case, it may be acceptable to make all payments payable to the property management company - but you would definitely want to verify to make sure. And, you should request a copy of the property management's companies declaration page of their Errors & Omissions Insurance to ensure they are insured to manage property.
Please feel free to share this information and the flow chart below with real estate brokers who do not understand the incorrectness of having tenants pay them directly. I have reviewed the correct procedure stated above in italics and outlined in the flow chart with the Texas Association of Realtors attorneys, and they agreed.
For more commentary from Julius, pick up a copy of his book entitled “The Truths and Myths of Real Estate” – available at LuLu.com at: http://www.lulu.com/shop/julius-zatopek/the-truths-myths-of-real-estate/paperback/product-21118216.html
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