Dear Monty: I own a business and the property. I recently decided to close my doors and retire. I put a closing sign in the front window. An agent asked if the property was for lease and if she could bring a client to look at it. After looking at it, the client was excited. The agent came the next day and told me that upon completion of the lease, I would owe them a commission fee. As I never asked for their help, am I obligated? They approached me and not the other way around. At least once a month, people come in and ask about leasing. I don't need any help.

Monty's Answer: You're not obligated to pay this commission. No written agreement means no enforceable commission claim. According to the National Association of Realtors' Code of Ethics, agents must have written authorization before claiming compensation. I suspect that The Statute of Frauds in all fifty states requires real estate agreements to be in writing to be enforceable.

This situation exemplifies why standardized transaction processes matter. The agent's approach, showing property first, discussing payment second, creates confusion that proper documentation prevents. You face both a legal question and a practical relationship dilemma with your prospective tenant.

Your Options:

Option 1: Negotiate directly with the tenant if you can contact them. Explain that you never authorized representation or agreed to pay commission. Consider offering to reduce rent by the amount they'd pay their agent if they lease directly. Based on my experience, landlord-paid commissions range from one month's rent for short-term leases to 6% of total lease value for longer terms. Some agents intro prospects by first name only.

Option 2: Offer the agent a reduced courtesy fee. While not obligated, offer 25% of the standard commission as goodwill. This acknowledges effort without rewarding unprofessional behavior. Document in writing this one-time courtesy payment, not an admission of obligation, protecting you from future claims. This option may not be necessary if you have the prospect's contact information.

Option 3: Decline payment and lease directly. Inform the agent that you never authorized services and will proceed without them. As mentioned earlier, oral real estate agreements are generally unenforceable. Risk: The agent might damage the tenant relationship, or you might lose this prospective tenant entirely.

Option 4: Establish clear protocols going forward. Since you receive monthly inquiries, create a one-page policy stating you handle leasing directly and don't compensate outside agents. Post it visibly. Consider whether flat fee leasing services make sense given regular interest.

Decision factors: Your comfort with confrontation, tenant quality, local market conditions for replacement tenants and leasing timeline appear strong. Seller markets favor Option 3; weaker markets might justify Option 2.

Document everything in writing. Never sign anything acknowledging a commission obligation. Professional agents establish compensation agreements before providing services, not after. The agent's behavior suggests either inexperience or intentional overreach.

Technology solutions now exist that standardize these interactions and prevent such confusion. Platforms that create clear documentation trails and established protocols eliminate ambiguity about who owes what to whom. This protects both property owners and legitimate tenant representatives.

Your instinct to question this arrangement is correct. The lack of a written agreement, combined with the agent's reverse-order approach, gives you both legal protection and moral standing to decline payment.

Richard Montgomery is a syndicated columnist, published author, retired real estate executive, serial entrepreneur and the founder of DearMonty.com and PropBox, Inc. He provides consumers with options to real estate issues. Follow him on Twitter (X) @montgomRM or DearMonty.com.

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