Referral Fees

Under the agency and disclosure rules effective June 15, 2018, you may receive a fee for referring consumers to other licensees, as long as it is:

• Paid through your brokerage; and
• Properly disclosed to your client.

Here is our advice on best practices:

At the outset of your relationship with the seller, discuss how you will deal with potential unrepresented buyers. Explain that if you refer unrepresented buyers to another licensee, you may receive a referral fee from that licensee.

That way, if the situation arises, you can say “remember when we talked about unrepresented buyers and referrals? I have been approached by an unrepresented buyer and I am going to refer the buyer to a licensee who has offered to pay me a referral fee.” By discussing the situation in advance, you’ll help to prevent misunderstandings later on.

When you receive, or anticipate receiving, a referral fee you must promptly disclose the referral fee in writing. You can use BCFSA’s Disclosure of Remuneration form. Make sure you include:

• The source (who is paying the referral fee);
• The amount, or if the amount is unknown, the likely amount or method of calculation of the amount; and
• Any other relevant facts related to the referral fee.

Each time you present an offer to your seller client you must disclose the referral fee, using the Disclosure to Sellers of Expected Remuneration. This ensures transparency, so your seller client is fully informed about the remuneration your brokerage will receive based on each offer.

Do referral fees that are made within the same brokerage need to be disclosed to the client?

You have a duty to disclose remuneration and material information to your client. If you are the designated agent for a buyer who was referred to you for a fee payable to another licensee in your brokerage, you would need to disclose to that buyer that you are paying a referral to the licensee who made the referral under section 30(f).

If you are a listing agent and the designated agent for the seller, and you anticipate receiving a referral fee from the designated agent for the buyer, who is also in your brokerage, you must disclose that to your seller client using the Disclosure of Remuneration.

If I need to refer a client to someone else, can I refer them to another licensee in my brokerage? Or do I have to refer them to another brokerage altogether?

If your brokerage is practicing designated agency, you could refer them to any licensee, as long as you have proper policies and procedures in place to protect your client’s information. You must not disclose a client’s confidential information to another licensee in the same brokerage (or another brokerage) who does not represent that same client.

Brokerages should adopt policies, procedures and enforcement mechanisms to protect the confidential information of their clients.

When you refer an unrepresented party to another licensee, that licensee has the same duties to that person they take on as a client as you do to your client. That includes

• Undivided loyalty;
• Acting in their best interest;
• Avoiding conflicts of interest;
• Maintaining confidentiality; and
• Disclosing material information.

Published on May 04, 2018