Topic: Resident Referral Fee Law Change?

A peer just told me that it is now illegal in the State of Texas to pay more than $50 for a resident referral and you cannot apply it as a concession. Is this true? If it is, it's news to me! :unsure:

The payment of Resident Referrals falls under the TExas Real Estate Code that states no amount can be paid for referrals over the amount of $50 unless it is paid to a licensed broker. Some have tried to get around this by 1099 the resident for any amount over $50 and therefore making them pay taxes on the income to avoid this. I would talk to your legal council but here is the real estate verbiage for your reference:


here is the link for the information:

www.texasrealestate.com/for-texas-realto...tegory/referral-fees

Someone told me that I could pay an unlicensed person a referral fee as long as the fee did not exceed $50. Is this true? (Nov. 1, 2006)

Under the provisions of Section 1101.002(1)(A)(ix) and (x) of the Real Estate License Act a person making a referral of prospects or property for the sale or rental of real estate must be licensed under the act if the referral is done with the expectation of receiving valuable consideration. In August 1999, TREC amended Section 535.20 of the TREC rules to provide that for purposes of that section, the term "valuable consideration" includes, but is not limited to: 1) money; 2) gifts of merchandise having a retail value greater than $50; 3) rent bonuses; and 4) discounts. If the referring party does not have a real estate license, then no referral fee could be paid to that party by the broker receiving the referral. Under the amended rule, a broker could give an unlicensed person a gift of merchandise having a value of no more than $50 and this would not subject the unlicensed recipient to a charge of unauthorized practice as a broker, nor result in a violation of TREC rules by the broker giving the nominal gift.

Does this include a rent concession? I have heard of companies trying to get around by offering rent discounts.

Thanks for the info!

Nevermind..


Someone told me that I could pay an unlicensed person a referral fee as long as the fee did not exceed $50. Is this true? (Nov. 1, 2006)

Under the provisions of Section 1101.002(1)(A)(ix) and (x) of the Real Estate License Act a person making a referral of prospects or property for the sale or rental of real estate must be licensed under the act if the referral is done with the expectation of receiving valuable consideration. In August 1999, TREC amended Section 535.20 of the TREC rules to provide that for purposes of that section, the term "valuable consideration" includes, but is not limited to: 1) money; 2) gifts of merchandise having a retail value greater than $50; 3) rent bonuses; and 4) discounts. If the referring party does not have a real estate license, then no referral fee could be paid to that party by the broker receiving the referral. Under the amended rule, a broker could give an unlicensed person a gift of merchandise having a value of no more than $50 and this would not subject the unlicensed recipient to a charge of unauthorized practice as a broker, nor result in a violation of TREC rules by the broker giving the nominal gift.

Again, many are getting around this by 1099 their residents so you can get a w9 at time of referral and then issue them a check for the amount paid and it will be treated as income much like a contractor would charge for services. I'm not saying it is legal or not just saying what I see is done. I would ask your attorney his stance on it. Brian Cweren is a local Texas attorney that is great and will surely give you a quick (probably free) answer.

Charmaine,
I passed along your question, and Anne Sadovsky and some others shared some feedback. Essentially she said that it is not against the law, but if we violate Texas Real Estate Commission's guideline of $50/referral, we risk them clamping down on the industry and forcing leasing consultants to be licensed. Further, any gift would be considered the same as cash.

However, she also said that it is "common practice is to ignore the $50 rule. Not saying its the right thing to do, just is what is being done and has been for 30 years.!"

Who can i see if it is legal for new management to change the referral law before January 2015. The apartments I am currently living in, gave a referral fee of 500.00, management changed in October 2014 and new management did not inform the tenants of the 50.00 referral change. The tenant i referred moved to the community in the same month new management took over, but when i attempted to get my referral fee of 500.00, they stated they could not honor this (note: they were the management company when my friend moved in, signed the lease and my name was on the referral form, and to date, no written documentation has been given to current residents, stating this referral change). Bottom line, should they honor the original referral, especially, since they were aware of my referral and according to them the law had not changed? Please inform or direct me to a person who can guide me on this issue. Thank you for your time.