Question on commission splitting with attorneys in PA

6 Replies

Hello, 

I am a licensed PA attorney, and I am also getting my real estate salesperson license shortly. Attorneys often require agents to sell property for clients, especially in estate and bankruptcy law. So my question is:

As an attorney and real estate agent, could I offer attorneys a split of commission  in return for them referring me listings/clients?

I should get to the bottom of this on my own, but I do not currently have access to any quality legal databases.

Thanks,

Joe

@Joe Chirdon I don't know your state's laws, but most states say commissions can only be paid to people/entities holding a real estate license.

Call your state's real estate licensing department or just go online and read their rules. You should be able to find a definitive answer.

@Joe Chirdon

Are you a PBA member? If so, you may want to try to the ethics hotline to see what they have to say.

Not an expert on this topic but here are some reading materials:

  • Here's a link to a somewhat relevant opinion from the Pennsylvania Bar Association and the Philadelphia Bar Association. The question was whether attorneys can receive referral fees for non-legal-service providers. Basic answer was "you probably shouldn't but it might be okay." 
  • Here's a link to an opinion from the NY Bar Association that is directly on point. They would say "absolutely not" if the lawyer gets to keep the commission.  
  • Link to an Philadelphia Bar Association opinion on whether a physician/attorney can receive referral fees for referring a patient to a personal injury firm. A bit convoluted but the answer appears to be "no". 

Personally, I would agree wtih the NY Bar Association opinion. I just see too much of a conflict of interest. 

Aside from the above, take a look at whether there would be RESPA issues and issues with your brokerage. If I was a broker, I wouldn't allow it. 

On a completely unrelated note, is there a reason why you are getting a salesperson license versus a broker license? Assuming you can meet the point requirements, you can skip and go directly to a broker license. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

 I think it's less a question of what the legal rules allow the attorney to do, and more a question of what the real estate department's rules allow a broker to do with regard to commission splitting.

@Stanley Bronstein

As practical matter, I think @Joe Chirdon would need to look into both issues. As a real estate salesperson, he would need to comply with the relevant laws and regulations with the State Real Estate Commission. At the same time, he's also an attorney and the referral fee is going to an attorney. Even if the Commission gives the blessing, the Disciplinary Board can have it's own opinion whether they want PA Attorney's exchanging money in this fashion. 

Historically, folks have tried to do a workaround for similiar situations by having the seller and or buyer pay the referral fee directly to an attorney that referred the transaction to the attorney/broker. Another work around was to call it as a legal fee instead of a referral fee. The legtimacy of such practices probably depends on the exact circumstances. But even then, the attorneys would need to think hard about what they would do if the Displinary Board decided to get involved.

And then there is a healthy debate between the legal community in PA about what level of jurisdiction the Commission has over attorneys to start off with. Some believe that the relevant laws and regulations have a wide exemption for attorneys. Other attorneys believe that the exemption is narrower. It's kind of a moot point since Joe --- by becoming a real estate salesperson --- is under the Commission's jurisdiction. But something to consider. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris K. and @Stanley Bronstein , thanks for the advice guys!!!

I tried calling the PA Real Estate Commission. They were no help. 

Chris, I'm going for my salesperson (I actually just passed the test Friday) as opposed to my broker license because 100% of my legal experience has been in Medical Malpractice and personal injury.  Although I have invested in real estate, I didn't feel comfortable trying to be a broker straight away. Maybe after a year or so I'll reconsider. 

Cheers!

@Joe Chirdon

It's hard to get a living human being to talk to you at the State Real Estate Commission until they "want" to talk to you. It is what it is. :/ 

I'm sure you already know this, but just remember that you will need to find a brokerage if you are just a salesperson. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

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