Our group has frequently discussed the value of using a contract to lease before signing an actual lease. While a contract to lease may serve the purpose of setting out what happens if the application is declined by the HOA or the tenant fails the background check, it can also be abused by realtors for their own personal gains.
A client used a realtor to obtain a tenant, and after six months the tenant offered to purchase the leased premises. About a week before closing the realtor popped up and demanded a 6% commission on the sale.
It turns out that in the boilerplate of the contract to lease was the following provision:
SALES: In the event that the subject property is sold to any tenant or occupant identified in the Lease or any member of their immediate family or any entity in which they have an interest during the term of the Lease (or any renewal, extension or new lease term), Landlord shall pay the Brokers (to be split equally) a sales commission equal to the greater of 6% of the sales price or the amount set forth in Landlord’s listing or other brokerage agreement with Listing Broker. This provision shall survive any subsequent agreement between Landlord and Tenant.
This appears to give the realtor a perpetual right to claim additional commissions every time the tenant renews the lease or purchases the property.
I have seen other versions of this same form bearing the Florida Realtors logo and copyright from Form Simplicity that do not have this clause, so it remains to be determined if this clause is an actual part of the copyrighted form or was added in by this particular realtor. Nevertheless, this highlights the point that realtors generally have no fiduciary duty to their clients. This means that they can legally advance their own interests to the detriment of their clients, as was the case with this life time commission agreement.
Bottom line: you have to read every word of a contract, even the “boilerplate,” or have an attorney review any contract before you sign it.