Realtors, mortgage brokers and lawyers have to be licensed and by paying a referral fee to their “Bird-Dogs” they introduce unlicensed person to their Trade, which is against the rules. So agents with different license can’t pay each other for the help received. The form of the referral fee (e.g. a bottle of wine, a cash payment, etc.) would not matter.
A realtor, mortgage broker or lawyer is, however, capable of receiving a referral fee from a third party (like an investor who doesn’t need to be licensed) provided that fees are disclosed to the client and the client agrees (preferably in writing). Referral fees are only acceptable when being paid to a registrant, through their brokerage, who (after taking a healthy bite) would in turn pay the agent.
However, agents can pay a referral fee for something not related to a transaction. So an agent can pay for a service to provide leads so long as the fees are for the leads not the transactions. This means no percentages and it has be paid whether or not the leads buy, sell or lease a property, gets a mortgage or closes with the given lawyer. Referred client must have given permission to have their information shared or else the Privacy Act steps in.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. For legal details consult your lawyer and read following documents:
- ss. 30(b) and (c) of the Real Estate Business and Brokers Act, 2002
- Rule 2.08(8) of the Law Society of Upper Canada’s Rules of Professional Conduct
- Law Society of Upper Canada’s Practice Management Guidelines
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