Case written in 1998
Case study: Is the "management fee" to the Tenant's
consultant a kickback?
This case study is interesting for realtors and landlords as it
appears to have elements of 'secret commission' although it does
not involve the two co-broking agents.
August 25, 1998
"We pay $4,500 rental for this condo and expect a high standard
of cleanliness on taking over from the Landlord and quality
furnishing! " exclaimed Mr Bridge in a booming voice and
eyeballs popping out, showing all eye-white. There were 'dust'
in the new refrigerator, the toilet and in the kitchen cabinets
of this new Condo. The Landlord refused to buy the 2 head-boards
for the divan beds ($450/king-sized bed wooden frame headboard)
and 3 table lamps saying that the furnishing budget had been
exceeded. Mr Bridge can be quite intimidating but he is a gentle
giant.
There was no prior
agreement to the quality of furnishing, the type of beds and
living set and the budget. Mr Bridge, being an American giant
over 6 foot 6 inches tall, needed extra-large king-sized
mattress (American size at 6' x 6.5') and extra wide living set.
Most sets in Singapore cater to Asians with small bottoms!
Mrs Bridge wanted to see
and test the comfort of mattresses, living and dining sets and
Asiahomes Realtor had to spend the whole day to take the Tenant
shopping for the living and dining set. We visited a maker of
living sets and showrooms. Mrs Bridge slept on the mattress
placed outside the shop in Joo Chiat referred to by the
Landlord. She was not bothered about her public exhibition.
The Landlord approved the
mattresses, the top quality 3+2+1 100% leather living set (i.e.
not half leather as in most cases) at S$3,300 with Mrs Bridge
paying $300 herself so that her husband can have a comfortable
2-seated and quality.
The dining table (glass
top) with 6 chairs cost S$1,400. Purchase of the new dryer and a
"Samsung 25" TV" exceeded the Landlord's furnishing budget and
he refused to pay for anymore items! The Landlady was not happy
with the "American-sized furnishing" as it costs more. The
Landlord wanted to withdraw his offer to rent. The Landlord was
advised to be patient to settle the deal.
Over 3 months' vacancy, 3
agents including Asiahomes Realtor given the keys, Owner
advertising himself. Asiahomes Realtor advertising and open
house every weekend for one month. This was not a popular unit
since it faces the pool and has a tennis court at its back and
being a ground floor unit, receives poor response. This case was
a money-loser for Asiahomes Realtor.
Mrs Bridge was an
excellent American Tenant, willing to accept the Landlord's
dining table but there were no soft-seated dining chairs and it
costs more to buy dining chairs. The Landlord's living set was
acceptable but the Landlord did not want the Tenant to inspect
it in his house. In the end, the Landlord approved new ones.
Since the budget was
"exceeded", our Asiahomes Realtor was told by the Landlord that
they would not get their payment till one month later although
the Landlord had agreed to pay after signing of the lease
agreement. This was not right but we had no choice.
Mr Bridge is the employee
of a multinational company. This Company has a
"Consultant". The Consultant accompanied the realtor for
house-hunting.
Mr Bridge closed on the condo unit marketed by Asiahomes
Realtor. The Consultant had a "Memorandum of Understanding"
whereby the Landlord agreed to pay her S$500/month during
tenancy. The Landlord was happy to pay the $500 and to receive
$4,000. Total "rental" payable by the company was S$4,500.
"There appears to be a
legal void, but I need to review the Consultant's memorandum of
understanding " said the Landlord's son, a graduate of a British
University with a first-class honors.
He said that the
Consultant's managing fee for rental unit was very high, 20% of
the Landlord's net rental and even top auditing firms don't
charge such fees. His father said this was a kickback. Mr and
Mrs Bridge were not aware of the $500 arrangement. Should they
be informed in view of the fact that Mr Bridge said he was
paying $4,500?
Is a Memorandum of
Understanding to pay $500/month from the Consultant for
providing services to Mr Bridge enforceable? Is it a Management
Contract in essence? Can the Landlord stop payment? Is it
relevant whether the $500 payment should be disclosed to Mr
Bridge? Is this a "kickback" and therefore corruption on the
part of the Consultant? Should the CPIB (Corruption Practices
Investigation Board) be informed? There was much emotions
involved as the rental decline coupled with the high mortgage
rates and high vacancy rates had stressed out all Landlords.
This is an unusual case as
the Consultant did not want Mr Bridge to know of the
arrangement. The $500/month management fee appeared excessive as
none of this amount apparently would benefit Mr Bridge.
To resolve the matter,
Asiahomes Realtor asked the Consultant to pay for the headboards
and the 3 lamps. Asiahomes Realtor also advised the Landlord
that he agreed to rent at S$4,000 voluntarily and whether the
Consultant gets $100 or $1,000, will not be relevant as there
are proper invoicing and receipts. Disclosing to Mr Bridge may
upset him more? The ball is now with the Landlord's lawyer son
and if there are legal developments, readers will be informed.
For newcomer expatriates,
there is a need to specify the quality and type of furnishing as
well as to the furnishing allowance.
1. There are no strict
rules but generous Landlords give 2 months' rental (around
S$8,000 for a 2 bedroom and $10,000 for a 3-bedroom) as
furnishing allowance which excludes the cost of curtains,
lighting, refrigerator, dryer, washing machine and television.
2. Estimated costs IN 2001
were as follows:
|
2.1 Quality all-leather
living set 3-seated + 2-seated + 1 armchair from an
upmarket furnishing company with big display showroom: |
S$3,000. |
|
2.2 Glass-top oval
dining table with 6 chairs: |
S$1,400 |
2.3 King Koil
American-sized divan mattress bed 6'x6.5'
No headboard. |
S$1,100* |
2.4 Wonderland brand as
in No. 3
No headboard. |
S$800* |
2.5 Wooden headboard
for above bed
Velvet type/PVC type, cheaper. |
S$450 |
|
2. 6. 29" TV
|
S$1,000 |
*purchased from Joo Chiat
Road direct from supplier of mattresses, but you may good
bargains from shopping malls.
3. If you leave buying of
new furniture to the Landlord, please be prepared for a cultural
shock as colours may be gaudy and the quality may be below your
life-style. It is best for the Landlord to shop with the Tenant,
leaving the Realtor out as there seems to be so much
misunderstanding and unhappiness as has happened in many cases
including this one. |
March
9, 2011
For Rent