5 things you didn't know about Florida's confusing referral fee law
According to Florida statute Section 475.25(1)(h), if you're not a licensed real estate broker, broker associate, or sales associate—it's illegal, in Florida, for any such entities to share, or grant you a commission, fee, or any other type of compensation. However, there certainly are exceptions.
Who's allowed to collect a fee
Most of us have been exposed at one point or another to a referral incentive. For example, if you refer a new tenant to your apartment complex, you're awarded fifty bucks. So, how do they get away with it?
The law includes a finder's fee exemption. Under this allowance, a property management firm, or landlord, may offer up to $50 for each tenant they recruit—as long as it's in the same complex.
Another, perhaps more obvious exception, is for out of state licenses. As long as no laws are being violated in either state, the statute allows for payment of referral fees, and shared brokerage commissions with a broker licensed, or registered, in another state.
What happens if you get caught
Permanent revocation and up a $1,000 fine define the strict end of disciplinary action the state can take for violating their referral laws. The minimum penalty is a $250 fine and a 30-day suspension. Repeat offenders face up to $5,000 in fines, per violation.
Preserving your professional reputation is another reason to conform to Florida's real estate laws. When choosing a realtor, clients are only a few clicks away from the legal history of all their options. Violating the referral laws can detract clients long after the actual penalties.
Navigating the law
Interpreting Section 475.25(1)(b) is always best left to the professionals, however, it's never a bad idea to arm yourself with knowledge.
- Referral fee payments. The law allows referral fees exclusively through a brokerage company. The only exception is if the broker requests, in writing, a direct payment at the closing time.
- Fees to associates in countries without real estate licensing. This is only permitted in two, rather broad and self-evident, situations. As long as no laws are broken in either Florida or the recipient's country, Section 475.25(1)(b) allows such payments.
- Referral agencies. Companies specializing in referring buyers and sellers to real estate and brokerage firms are considered to be engaging in real estate activity. Referral agencies are required to register as a real estate brokerage with the Florida Department of Real Estate/Department of Business Professional Regulation (DBPR/DRE).
- The attorney exemption. Lawyers are allotted a special exemption from the licensing requirement, however—only when such fees are derived from their duties as an attorney. Referring customers or businesses to real estate activity doesn't fall under the scope of a lawyer's professional responsibilities. If a licensed broker pays an attorney a referral fee, both parties may face punishment.
- It's not just attorneys. Any licensee who pays a non-licensed associate a referral fee is in violation of the law.
How to avoid criminal charges
To the uninitiated, or licensed but forgetful, Florida real estate law can be riddled with trap doors. To avoid civil, or criminal charges, it's always smart to consult with a qualified real estate attorney.
When it comes to running a condominium, the law can be even trickier. Whether you're a condo director, tenant, or looking to buy—our guide for navigating crimes associated with condominiums will help you avoid disaster.