Do building management companies get kickbacks from plumbers and other contractors?

[steve_hans]

Very curious about this. One of the buildings I am in keeps using this horribly rated plumbing company in Manhattan (won't name names, but they are 2.2 stars of out 5 on Google Reviews). This is despite the fact that one of the owners has been taken to small claims court by them and lost. This owner has disclosed this to everyone including the managing agent, yet the building continues to use them as their go to plumber.

How does this make sense? Wouldn't the plumber be even less incentivized to do a good job and charge less given the existing beef with one of the owners (it's a small building)?

There must be a reason that the managing agent keeps choosing this horribly rated plumber. Are they getting a kick back or referral of some sort? Hope that is illegal?

[aslan]

Interesting, I'm not entirely sure, but I do know that the managing agent of a building is also a licensed real estate broker, and acts with "general agency" for the benefit of the building and all of its owners. So the management company should always be acting in the best interests of the owners regardless.

With that said, I definitely know kickbacks are illegal when it comes to brokerage commissions, with the exception of course for buyer's broker commission rebates. However, anything other than rebating brokerage commissions directly to the buyer is illegal. That means a broker can't kickback half a percent to a hairdresser who referred him a client.

So can a plumber kickback a fee to a managing agent (who is also a broker) for referring them building business? I'm not sure but it certainly sounds shady if it's not outright illegal! Check with your lawyer!