It's the Rule - February 2006

by: President & CEO Terese (Terry) Penza, CAE, RCE, e-Pro

IAR Legal Update
At the Mini Convention in January Betsy Urbance, attorney for the IAR Legal Hot Line gave 2 presentations at which she discussed further the issue in my January article about open houses are arbitration. She also covered information about referral fees. For a CD of the presentation contact Mike at our office 8447-480-7177 to purchase a copy for $9.00.

MLSNI Special Meeting May 10
I have wonderful news -- MLSNI passed the following motion: A special meeting of MLSNI’s Shareholders and Board of Directors will be held on Wednesday, May 10, 2006. The purpose of this meeting will be to discuss and approve consolidation documents relating to the proposed MLSNI-MAP consolidation. The meeting will be at MLSNI, time to be determined. It is a start. Remember, go to Quick Links on nsbar.org and then HOT News for the latest information.

Referrals vs. Inducements
Every day we receive calls asking about referrals and who can we legally give them to. First, let's look at the terms. In the Illinois license law referrals are as any valuable consideration:

"Compensation" means the valuable consideration given by one person or entity to another person or entity in exchange for the performance of some activity or service. Compensation shall include the transfer of valuable consideration, including without limitation the following:
(1) Commissions;
(2) Referral fees;
(3) Bonuses;
(4) Prizes;
(5) Merchandise;
(6) Finder fees;
(7) Performance of services;
(8) Coupons or gift certificates;
(9) Discounts;
(10) Rebates;
(11) A chance to win a raffle, drawing, lottery, or similar game of chance not prohibited by any other law or statute;
(12) Retainer fee; or
(13) Salary.

Inducements:
A licensee may offer cash, gifts, prizes, awards, coupons, merchandise, rebates or chances to win a game of chance, if not prohibited by any other law or statute, to a consumer as an inducement to that consumer to use the services of the licensee even if the licensee and consumer do not ultimately enter into a broker‑client relationship so long as the offer complies with the provisions of subdivision (26) of subsection (h) of Section 20‑20 of this Act.

Who can be paid?
(a) No compensation may be paid to any unlicensed person in exchange for the person performing licensed activities in violation of this Act.
(c) A licensee may offer compensation, including prizes, merchandise, services, rebates, discounts, or other consideration to an unlicensed person who is a party to a contract to buy or sell real estate or is a party to a contract for the lease of real estate, so long as the offer complies with the provisions of subdivision (26) of subsection (h) of Section 20‑20 of this Act.
(d) A licensee may offer cash, gifts, prizes, awards, coupons, merchandise, rebates or chances to win a game of chance, if not prohibited by any other law or statute, to a consumer as an inducement to that consumer to use the services of the licensee even if the licensee and consumer do not ultimately enter into a broker‑client relationship so long as the offer complies with the provisions of subdivision (26) of subsection (h) of Section 20‑20 of this Act.
26) Advertising or offering merchandise or services
as free if any conditions or obligations necessary for receiving the merchandise or services are not disclosed in the same advertisement or offer. These conditions or obligations include without limitation the requirement that the recipient attend a promotional activity or visit a real estate site. As used in this subdivision (26), "free" includes terms such as "award", "prize", "no charge", "free of charge", "without charge", and similar words or phrases that reasonably lead a person to believe that he or she may receive or has been selected to receive something of value, without any conditions or obligations on the part of the recipient.

So with all this background: Referrals go from licensed sponsor broker to licensed sponsor broker for money or any other valuable consideration. Give a TV to someone who gives you a referral is against the license law. Give everybody a TV who comes to your office, that is an inducement and is legal under the license law. Anything given for exchange of referrals - against the license law.

A retirement community who does not have a real estate license can give a referral but it must go through the sponsoring broker. The broker and agent could NOT give a referral to that same retirement community who referred them to a potential buyer or seller.

Raffles - you will need to cover that with your attorney and the Illinois laws on gambling.