Can Texas Attorneys Collect Referral Fees?

Referral Fees To Texas Attorney

This is always a hot topic and so many people are not aware of the laws and rules which govern it.

Texas attorneys can represent both sellers and buyers. Given that few attorneys are also brokers or salespersons, they don’t usually represent sellers who need to have a property marketed. The most common situation is an attorney representing a buyer. While the attorney can represent them, it is illegal for a Texas broker to share a commission with an unlicensed person or entity (other than a party to the transaction). Texas attorneys can collect a fee from the client they represent or even the seller if the parties agree (TRELA §1101.651(a) and §1101.652(b)(11) respectively). Listing brokers can reduce their commission so that the seller can pay the attorney directly without violating the Act.

The same rules apply to the referral fees. Brokers cannot pay referral fee (valuable consideration) to unlicensed persons or entities. There is an exception found in TREC Rule 535.20(a) which allows brokers and salespersons to provide gifts of merchandise with a retail value of $50 or less. Such gifts are not considered valuable consideration.

Tom Branch

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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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Originally posted at

Do Referral Fees Add Cost to the Consumer?

Referral Fees

Lately, there have been a few online postings that referral fees should be illegal because they add cost to the consumer. I’ve read all the arguments, yet I’m not sure how they arrive at that conclusion.

I could see the argument, if I were to raise my cost to the consumer on transactions where I have agreed to pay a referral fee. While this may happen from time to time, I believe the vast majority of brokers see it as the cost of doing business. I either pay to advertise, farm, or some other means of acquiring new clients or I pay a referral fee to an out of area broker who has a client needing to buy or sell a property in my area.

While I don’t work relocation business, relocation companies collect referral fees from brokers who accept their relocation clients. Why is a broker-to-broker referral any different?

The bottom line is that unless brokers raise prices on transactions involving a referral fee, there is no additional cost to the consumer.

Tom Branch

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Originally posted at