The following information is directly from the Greater Boston Real Estate Board.
July 18, 2025 – There’s been much attention in the media recently regarding fees charged to tenants for the services of a broker in locating an apartment. Many have argued that this creates an additional financial burden on rental applicants already struggling with the high cost of housing in Massachusetts. Brokers justify the fees as well-deserved compensation for their expertise, assistance and familiarity with the market. Massachusetts has now enacted legislation, effective August 1, to regulate these fees. The text reads as follows:
A licensed broker or salesperson may solely contract with a prospective tenant to find rental residential real property for a tenant and present an offer to lease to the landlord or landlord’s agent and negotiate on behalf of the tenant or may solely contract with a landlord or landlord’s agent to find a tenant for a property. Any fee shall only be paid by the party, lessor or tenant who originally engaged and entered into a contract with the licensed broker or salesperson. (M.G.L. c. 112 § 87 DDD1/2)
It must be emphasized at the outset that the new law does not address every business possibility in the residential rental market and some ambiguity is expected as we await court or state regulatory interpretation. While the following guidelines may be useful, members should rely on the advice of their own counsel related to specific business practices.
- One licensee working on behalf of a landlord and also working on behalf of a tenant in the same rental transaction is prohibited by the new law given use of the word “solely” in the first sentence, meaning that a licensee cannot contract with, or collect a fee from, both the landlord and the tenant. However, for brokerage firms that have adopted a practice of “Designated Agency” in rental transactions, the inclusion of “broker or salesperson” in the statute seems to allow a brokerage firm to designate one salesperson to work with the landlord or tenant to the exclusion of all other licensees in the office; thus allowing any of those remaining licensees to be designated to contract with, and collect a fee from, the other party.
- It will no longer be legal for a single licensee to work “on behalf of” a tenant looking for an apartment while screening that very same tenant on behalf of the landlord regarding the suitability of the prospective tenant to rent the landlord’s premises. The licensee may however collect credit data and other information to accompany the rental application but should do so for the benefit of the tenant.
- If Brokerage A designates Agent 1 to engage with the landlord to find a tenant for their property and a tenant connects with Agent 2 of Brokerage A, both salespersons in a designated brokerage would be able to fully represent their respective parties to the exclusion of each other and all other licensees in the office while adhering to the provisions of the new law.
- There’s a misconception that tenants may no longer be required under any circumstances to compensate real estate licensees for their services. This is not the case. The first sentence of the new law specifically reads that a tenant may contract with a broker or salesperson. The second sentence specifically reads that the tenant who originally engaged and contracted with their broker or salesperson will pay for that representation. Assume that someone has noticed a “For Rent” sign outside an apartment building or an advertisement for an apartment. If that prospective tenant connects with a licensee seeking assistance in leasing the same premises, that licensee, so long as he or she has not engaged and contracted with the landlord, can contract with the tenant for a fee. Just like any other real estate relationship, the consumer and the professional may choose to enter into a variety of representation or fee agreements, including exclusive or non-exclusive engagements, but in any case, pursuant to 254 CMR 7.00, the tenant must receive an appropriate rental fee disclosure in order for the agent to be able to collect a fee from the tenant.
- While advertisements for rentals may appear in the window of a building or in the newspaper, they’re more likely to be found on an on-line platform like Apartments.com or Zumper. Once again, a broker having no involvement with the landlord is free to engage with tenants to present an offer to lease to the landlord or landlord’s agent and negotiate on behalf of the tenant for a fee.
- On the other hand, if a licensee has already contracted with the landlord to find a tenant for the property, the licensee will be precluded from charging a fee to a tenant wishing to lease the landlord’s apartment. Especially outside the Boston metropolitan area, it’s common for landlords to enter into rental listing agreements. Those licensees won’t be able to demand compensation from tenants even if the landlord hasn’t promised to pay a fee. In such instances, the licensee shouldn’t accept the listing until establishing an acceptable fee payable by the landlord. Note 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.
- Licensees and consumers may wish to engage in different types of contractual relationships such as oral agreements, written exclusive relationships, non- exclusive service agreements or simply just a rental fee disclosure ahead of exploring a particular property.
- Although there is no requirement in the second sentence of the new law that a contract be in writing with a landlord, it may be extremely difficult to enforce a verbal contract to pay a brokerage commission and, in any event, a tenant would need to sign a Brokerage Fee Disclosure Form in order to collect a fee from a tenant.
- In cases where a landlord has an agreement with a broker to include a landlord’s listings on the broker’s website in exchange for the broker’s assistance in procuring a tenant, a tenant may try to avoid a fee by claiming that a licensee had a pre-existing informal contractual relationship with the landlord.
- Licensees should be careful as to the extent of advertising undertaken on behalf of the landlord. For example, if a listing is promoted on a public site by another real estate professional or by the landlord itself, you would be free to share the listing with potential tenants in order to work for them in securing a rental. Conversely, if you are on a private listing network in which the landlord is engaging your expertise in placing a tenant you may have inadvertently created a contractual relationship with the landlord and be prohibited from collecting a fee from a tenant.
- It will no longer be possible to distribute a residential rental listing through a Multiple Listing Service or any advertising platform with a notation that the commission is to be paid by the tenant.
- A plain reading of the statute would prohibit a landlord from paying a fee to a tenant’s representative and would also bar the sharing of fees between a landlord representative and a tenant representative. A landlord may be able to offer a concession to the tenant, whereby the tenant would be free to utilize the concession to pay for the services of the licensee they engaged if they wish to do so.
- The new law takes effect on August 1 but should not apply retroactively to fees collected prior to that date regardless of when the term of the lease is scheduled to commence.