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Making Referral Money? Fla. Law Oversees How It’s Done

Brokers and associates take note: Referrals – a lead you give to agents outside your area in return for a fee – are a great way to make extra money, but Florida law has clear guidelines on how you can legally receive a payment.

ORLANDO, Fla. – In today’s real estate world, there are various business models, including nationwide referral services that allow agents from across the U.S. to refer customers to other businesses when they’re interested in a farther-away home location. While these referral businesses can offer agents additional income, though, it’s important to make sure that you’re complying with Florida law with regards to how you collect compensation from those businesses.

Let’s take a refresher course on how Florida agents are to be paid to make sure everyone collecting fees for real estate services is complying with state law.

Under the violations and penalties section of Florida Statute 475, which governs real estate licensees, section 475.42(1)(d) states, in part, that “a sales associate may not collect any money in connection with any real estate brokerage transaction, whether as commission, deposit, payment, rental, or otherwise, except in the name of the employer and with the express consent of the employer.

Let’s break this down to make it clearer: If you are a sales associate or broker associate and collecting any fee in relation to a real estate transaction, you cannot collect that fee directly. It must run through your brokerage. (Note: Pursuant to the definitions section of Florida Statute Chapter 475, a broker associate is someone who can qualify for a broker’s license but is operating as a sales associate.)

Calls to Florida Realtors Legal Hotline indicate that some national business models offer compensation directly to associates. While this may be acceptable in other states, in Florida it is not.

Again, any compensation for real estate services must be run through the brokerage and then paid to the associate by the brokerage.

Note there are options, however, on how a brokerage can pay its associates. Florida Statute 475.161 allows for an associate to establish certain corporations and a brokerage could pay their associate via that established corporation, namely either a professional corporation, a P.A., a limited liability company (LLC) or a professional limited liability company (PLLC).

It’s important to remember that whichever corporation you choose as an associate, it must be in your licensed name only, i.e. John Smith, PA. An associate cannot receive payment via a corporation such as Smith’s Realty, LLC. If an associate has not established any corporation, then they should be paid individually, i.e. John Smith.

It is wonderful that there are various ways for real estate licensees to earn income – but it’s imperative to remember how payment must be handled in order to comply with state law.

Meredith Caruso is Associate General Counsel for Florida Realtors
Note: Information deemed accurate on date of publication

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