North Carolina real estate brokers and salesmen should be aware that sales promotion programs which award bonus fees or prizes to agents through drawings may constitute unlawful lotteries.
Although they go by a variety of names, the programs in question all share certain basic elements. Typically, a real estate broker or firm advertises that agents who procure buyers for selected listed properties will become eligible to win a prize or bonus. After a certain number of designated properties have been sold, or perhaps after a specified period of time, the listing broker or firm draws a winner from the names of all eligible agents. The bonus or prize awarded to the winner isusually cash, but may be a trip or anything else of value. The prize or bunus is over-and-above the fee customarily paid to the selling agent.
The Attorney General's office has advised the Real Estate Commission that real estate sales promotional programs like the one decribed constitute unlawful lotteries under the General Statutes of North Carolina. By definition, a lottery is any program or scheme which awards a prize to one or more persons selected from a larger number of people by means of chance.
A lottery is unlawful when each entrant in the lottery either pays money or gives a thing of value in order to participate. In a real estate bonus lottery, selling agents give a thing of value - their professional services as brokers and salesmen - to become eligible for a chance to win.
Under North Carolina law, it is a misdemeanor criminal offense to set up, operate, advertise, promote or even participate in an unlawful lottery. In addition to possible criminal penalities, North Carolina brokers and salesmen who participate in a sales promotion determined to be an unlawful lottery also may face license suspension or revocation.
Can a selling agent who procures a buyer for a property included in a lottery-type sales promotion avoid criminal liability by refusing to participate in the drawing and renouncing any chance to win? The answer depends upon whether the courts recognize the real estate sales transaction and the conduct of the selling agent to be separate from the lottery. Our courts have not yet been called upon to answer this question; it is possible that a court could find that the lottery taints the whole real estate transaction and those who participate in it.
Not all sales promotional programs involving bonuses are unlawful lotteries. Real estate salesmen are reminded, however, that when bonuses are to be paid to salesmen from other firms who are acting as selling agents, the bonus should be paid to the salesman only through his or her broker-in-charge.
Before developing or using any program which includes a drawing, lottery or other chance selection of awarding a bonus or other payment, a prudent real estate licensee will consult with his of her attorney. In fact, the safest course is to avoid such programs and properties altogether.