February 18th - 2007

Bird dog fees violate REBBA 2002

Representing both a buyer and a seller in a real estate transaction can be tricky.

Referrals play an important role in a REALTORS® business and paying a fee to another REALTOR® who refers a client is common practice. But paying a fee to, or accepting payment from, an unlicensed person for a referral is an illegal practice known as a bird dog fee.
 
Under REBBA 2002, a bird dog fee is defined as “some form of compensation paid to a third party to a real estate transaction in recognition of that person’s referral of a lead resulting in a customer, be it buyer or seller, dealing with either the brokerage firm and/or a specific broker or salesperson.” For example: You have a friend who tells you his brother is going to put his house up for sale. You tell your friend that if his brother lists with you, you will pay him $1,000 after the house sells as a “thank you” for the business. Once the house sells and you pay your friend out of your commission, and your friend accepts it, you will have violated the rules of REBBA 2002 and you could be charged with up to $50,000 in fines, 2 years in jail and possibly lose your real estate registration.
 
Even if the “thank you” gift is not monetary it is still considered a bird dog fee. In the Registrar’s Bulletin on Bird Dog Fees (pg. 80 of the Guide to REBBA 2002), it states, “As far as the type of compensation, it would not appear to matter the ‘coin of the realm.’ That is, a bottle of liquor or a cash payment of $1,000.00.” Basically, any form of compensation to an unregistered person for activities that would be defined as “in furtherance of a trade,” is prohibited. However, the payment of rebates or other remuneration to a party to the real estate transaction (buyer or seller) is permitted with the appropriate disclosure. Section 25 of the Code (pg. 254 of the Guide) deals with agreements relating to commission and offers guidelines for disclosing any terms between the brokerage and the seller or buyer.
 
The bottom line is, any commission paid to a person without an active real estate registration as a result of a transaction, is illegal in Ontario. Referral fees are only acceptable when being paid to a registrant, through their brokerage. The Registrar’s Bulletin also states that “where a brokerage is aware of, or more obviously, where the brokerage were to use an employee/salesperson as a conduit to pay some form of compensation in an attempt to avoid the appropriate sections of the Act, this activity would be construed to be a violation.” For more information, see the Registrar’s Bulletin on Bird Dog Fees in the Guide to REBBA 2002 available online at http://www.reco.on.ca/.

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Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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