Q: Can I pay a referral fee to a non-licensed person in NJ real estate?
I am a licensed commercial real estate salesperson in New Jersey. A business acquaintance, who is not a licensed real estate professional, has offered to refer real estate clients to me in exchange for a finder's fee, potentially around 5% of the transaction value. I am unsure about the regulations regarding referral fees for real estate transactions in New Jersey. Can I legally pay them a referral or finder's fee for this service?
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- New Jersey
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- Answered
A:
In New Jersey, a licensed real estate salesperson cannot legally pay a referral or finder’s fee to an unlicensed individual for referring real estate clients. The New Jersey Real Estate Commission strictly prohibits compensating individuals who are not licensed under the New Jersey Real Estate Licensing Act (N.J.S.A. 45:15-1 et seq.) for activities that require a real estate license, and client referrals fall within those activities.
Offering compensation to an unlicensed person for bringing in a client, even if it’s framed as a “finder’s fee” or structured as a percentage of the transaction value, is considered the unauthorized practice of real estate. Violating this law could lead to disciplinary action by the Commission, including fines, suspension, or revocation of the salesperson’s license.
The only individuals who may legally receive compensation for referring clients in real estate transactions are those who hold a valid real estate license in New Jersey. This includes brokers, salespersons, and referral agents. If a person is interested in earning money from real estate referrals, the proper course of action is to obtain a real estate referral agent license, which is more limited than a full salesperson license but permits legally receiving referral fees.
There are no exceptions to this rule for friends, business acquaintances, or individuals who happen to know someone interested in buying or selling real estate. Even if the unlicensed individual does not participate in the transaction beyond the introduction, compensation is not permitted under New Jersey law.
Therefore, as a licensed real estate salesperson in New Jersey, you cannot pay a referral or finder’s fee to an unlicensed person for client referrals. If this acquaintance wants to refer clients for compensation, they should consider becoming licensed as a referral agent through the New Jersey Real Estate Commission.
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A: That is strictly prohibited by your professional code of ethics. No matter what you call the money on your check. Do not put your RE license at risk.
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