Non-licensed Consulting fee

[Christopher Jason Lloyd]

Hey Everyone!

Came across something very odd recently. I recently had a client in negotiations with a seller on a pretty solid deal. Won't go into the details but great cash flow. He brought this to another investor for a "second opinion" and the investor gave a quick opinion (no problem with me). The problem came up when the investor giving the opinion bashed the deal, BUT then offered to partner with my client for a large equity split. The investor clearly saw how great of a deal we were getting but used scare tactics to amplify risks that we have already made contingencies for in the contract. Luckily, the buyer was the one that noticed giving up equity in the deal was a bad deal for him. (Investor wanted 40-50% equity and cash flow to be a PM on the deal, my affiliate PM company only charges 8% on rents on this unit count with no "equity agreement"). And then I explained he gets 100% of the ownership benefits if he hires a PM instead of sells equity to one.

A week later, this investor offered a "consulting" agreement to this investor to charge him $3000 (deal specific, not for a course) to double check the transaction throughout the process. Is this a legal fee to charge someone as a part of a transaction? The range of his consulting seems to be the scope of recommending that he does certain things on aquisition. He recommending all the due diligence advice I am already telling him to do: inspections, estoppel certificates, rent ledgers, etc... without any extra charge to the client. I feel its a B.S. fee, but my question: Are the services being offered "agent" services? And is it legal for him to collect a consulting commission?

[Matt Devincenzo]

It sounds legal to me...reviewing docs and providing advise isn't 'brokering' a transaction. An agent may also provide that same feedback and service without a consulting fee, but paying for it doesn't make it incorrect. That said, I certainly wouldn't pay for that service.