Texas: $50 referral fee question

5 Replies

I'm checking into something that came up in a meeting last week.  Someone mentioned that amounts paid to existing residents who refer new residents to a multifamily community are capped in the state of Texas at $50.

My research so far has led me to Section 535.20 of the Texas Administative Code, which, according to my reading, limits payments, gifts, concessions or discounts made by licensed real estate brokers to nonlicensed people to $50.

Does such a cap, or do any other limits, exist on payments made by other personnel or entities?  For example, are there any limitations on such compensation being paid by the owner or the management company?  If so, a citation would be appreciated.

Thanks.

Thanks.  I'm no closer to having the question answered, though. 

The sections of the statute cited above provide are only definitional in nature with regard to the term "broker," and do not address the legality of the practice I am interested in.  (I don't see how (ix) applies, since no one is procuring any property to effect the transfer, and (x) definitely doesn't apply, as it refers to singl-family residences.  Actually (vii) and (viii) might be more applicable, but, again, they are definitional in nature.)  And I don't see anything else in the statute that prohibits the payment of referral fees in excess of $50 by the owner or the management company, so long as neither is a licensed broker.

The implementing regulation in the TAC/TREC applies to licensed brokers.  What I'm looking for is a prohibition on the payment of referral fees of more than $50 in value to "all" brokers, "licensed and unlicensed brokers," and/or "any person."  All I have seen so far is a prohibition on the payment by "licensed brokers."

@Dillard Stone   Sorry, I might have skipped a few steps.  

Sec. 1101.351  Requires brokers and their agents to be licensed.

Section 1101.002(1)(A)(viii and ix) define what you are talking about as acting as a broker.

So if I, as an owner, pay a tenant $51 for referring a new tenant to me, I have not violated TAC 535.20, since that prohibits such a transaction only by licensed brokers.  Instead, I have violated Section 1101.351 by acting as a broker (as defined in Section 1101.002(1)(A)(viii and ix) without a license.  Correct?

How realistic is is that the TREC or DPS or whomever would show up at my doorstep for making such a payment?  And, if they did, what is the penalty?

Originally posted by @Dillard Stone :

So if I, as an owner, pay a tenant $51 for referring a new tenant to me, I have not violated TAC 535.20, since that prohibits such a transaction only by licensed brokers.  Instead, I have violated Section 1101.351 by acting as a broker (as defined in Section 1101.002(1)(A)(viii and ix) without a license.  Correct?

How realistic is is that the TREC or DPS or whomever would show up at my doorstep for making such a payment?  And, if they did, what is the penalty?

 I don't specifically know squat about Texas real estate law. But what I'll say:

Most illegal real estate things, most of the time, you will likely get away with it. Kind of like speeding or jay-walking.

However, the issue that comes up is that when you are eventually caught, it's not a speeding ticket or some trivial hand-slap, the consequences are typically rather massive.

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