Are Referral Fees Legal In Texas?

Referral Fees in Texas

“Are referral fees legal in Texas?” We seem to get this question all the time. There are two kinds of referrals. One comes from unlicensed people and the other from licensees.

Referrals From Unlicensed People

The Texas Administrative Code (TAC) 535.20 limits payment to non-licensed people to $50. Some people will try to skirt the law by purchasing gift cards or paying directly on behalf of the referral source. The rule clearly states, “the term valuable consideration includes but is not limited to money, gifts of merchandise having a retail value greater than $50, rent bonuses and discounts.”

Note that it’s not illegal for the consumer to accept the payment but the payment of consideration exceeding the amounts specified in 535.30 is grounds for a licensee to have their license suspended or revoked.

Referrals From Licensees

The Texas Occupations Code 1101.651 allows brokers to share fees and commissions with salespersons (agents) they sponsor and other brokers. TAC 535.131 clarifies this to include the sharing of fees and commissions with out of state and foreign brokers.

The bottom line is that referral fees paid to non-licensees cannot exceed $50 in cash, goods, services, rebates, etc. Referral fees paid to other brokers are acceptable and subject to the agreement between the brokers.

Tom Branch

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About Tom Branch

Tom Branch has written 597 posts in this blog.

Have you ever just met someone, but felt you like you'd known him for years? That's what most people experience with Tom. He has a knack for making folks feel right at home. After 21 years in the Air Force, loyalty and honesty are the foundation of everything Tom does. In addition to being a Texas Real Estate Broker, Tom is a Certified Distressed Property Expert (CDPE) and a Short Sales & Foreclosure Resource (SFR).