By Marilyn E. Tomei, Associate Legal Counsel
Among the questions most frequently posed to the Commission's attorneys and information officers are those involving the payment of "referral fees" to unlicensed persons. Consequently, although this issue has been addressed in previous Bulletins, further discussion may be in order.
The prohibition against paying or sharing commissions with unlicensed persons arises from the definition of "real estate broker" found in the Real Estate License Law. It defines a broker as one who, for compensation, offers to buy, see, lease, etc. real estate for others. It further provides that a license is required to am as a real estate broker. Consequently, only a licensed broker (or a licensed salesman acting under the supervision of a licensed broker) may be compensated for putting a buyer and a sever or a landlord and a tenant together in a real estate transaction.
For example, a licensed broker offers to pay a fee to a recent buyer of one of his firm's listings for referring potential purchasers to his firm. The buyer does not have a real estate broker or salesman license. In paying the referral fee, the broker is, in essence, sharing with the unlicensed "referrer" the commission that the broker will ultimately earn on the sale. The same would be true if the broker takes the referrer out to dinner, rents him his beach condominium for less than its market rent, or lets the referrer use his boat for the weekend. They an constitute "compensation" to an unlicensed person and are therefore prohibited by the License Law.
A related question concerns whether agents may receive referral fees or other incentives from home inspectors, termite inspectors, contractors and other persons with whom buyers and sellers may have contact in real estate transactions. Assume, for example, that a broker has an agreement with a home inspector whereby the inspector agrees to pay the broker S 50 for every potential client that the broker sends to him. Although this arrangement is not prohibited, Commission rules require the broker to fully disclose to buyers that they will be compensated if the buyers retain the services of the inspector.
Still another related question is under what circumstances may a real estate licensee pay a referral fee to another licensee? Assume, for example, that you are a broker in Greensboro. You receive a can from a licensed salesman in Wilmington who says that he has an acquaintance who wants to buy a home in Greensboro but that he expects a referral fee for sending this prospect to you. Can you pay a referral fee directly to this salesman? No. You may only pay the salesman a referral fee if he has an active salesman's license and is properly and actively supervised by a broker-in-charge. A telephone can to the Real Estate Commission can confirm these fans. Payment of the referral fee must be made to the salesman's broker-in-charge. (You may also want to telephone the broker-in-charge to be sure that the broker-in-charge is aware of the salesman's referral activities.)
Likewise, suppose the licensee expecting the referral fee is licensed as a broker in Florida but not in North Carolina. You may pay a referral fee to the Florida broker only if the broker is properly licensed in Florida (where the referral is made) and the Florida broker has not and will not enter North Carolina, either personally or through an employee or agent, to participate in the transaction.
Just remember: The am of referring potential clients and customers to real estate agents for or in expectation of compensation requires a real estate license. And licensed brokers and salesmen who make referrals must be treated the same as if they were rendering other, more traditional, real estate services, so that all of the provisions of the Real Estate License Law and rules apply.