Is this legal?

by Ron Walker   With the growing number of businesses participating in affinity marketing, legal considerations continue to evolve. One recent case was settled in Mississippi.

The Mississippi Real Estate Commission (MREC) prohibits the payment of brokerage and referral fees to any unlicensed person regardless of whether the person is a principal in a transaction. The commission ruled that a real estate licensee could not pay a referral fee to another real estate licensee when the first licensee knew the second licensee would pay part of that fee to an unlicensed person (namely, the principal in the transaction). PHH Real Estate Services Corporation challenged that rule as a potential violation of the Real Estate Settlement Procedures Act (RESPA).

In August 1997, the U.S. District Court in Mississippi upheld the MREC rule. The application of this decision is limited to Mississippi and probably will not affect states that permit fully disclosed rebates from licensees to principals in transactions. Texas does not prohibit the payment of inducements or rebates to principals in a real estate transaction provided that sufficient disclosure is made to the parties and any lender.

Ron Walker is TAR director of legal affairs.

Buyers & sellers, visit www.texasrealestate.com.
REALTORS®, visit www.tar.org.