Can You Pay Referral Fees to an agent with an Inactive License? Maybe!

May a referral fee be paid to an agent with an inactive license?

Release Date: 9/1/2015
QUESTION: Our firm entered into a referral agreement with another firm that referred a prospective
seller to us.  We got the listing and the property has just closed.  The individual agent who made the referral had an active real estate license at the time of the referral; however, sometime after she made the referral but before closing, her license went on inactive status. Can we pay the referral fee to the other firm if the referring agent’s license was inactive at the time of closing?

ANSWER: Yes, based on the facts of your situation.  According to the Real Estate Commission’s Broker-in-Charge Guide, the general rule is that in order to receive compensation for brokerage services, the recipient must have a license that is current (meaning his or her renewal fee has been paid) and that is on active status.  The term “brokerage services” includes the referral of real estate business in consideration for the payment of compensation.  Real Estate Commission Rule 58A.0504(a) provides that a broker whose license is on inactive status “…shall not engage in any activity requiring a real estate license, including the referral for compensation of a prospective seller, buyer, landlord or tenant to another real estate broker or any other party.”
However, the BIC Guide goes on explain that the “key question” is whether the broker was entitled to engage in brokerage activities throughout the period when the services for which he or she is seeking compensation were rendered.  In the situation you describe, the brokerage service rendered was simply the referral of the seller prospect.  Since, at the time of the referral, the referring broker’s license was on active status, in our view it would be appropriate to pay the agreed-upon referral fee.  It should be paid to the other firm, which may then pay the referring agent according to its agreement with the agent.

NCAR provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.
© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

Closing Delays...How Long is Too Long?

How long can you delay a closing?

Release Date: 8/4/2015
QUESTION: I have one of my listings under contract.  We’re past the Settlement Date and now the buyer’s agent says the buyer needs a new Settlement Date because her lender has been slow in approving her loan.  My seller wants to sell his house to the buyer but he has a back-up contract in place and is a little reluctant to give the first buyer another 14 days after a new Settlement Date to complete the purchase. If he agrees to a new Settlement Date, does the 14-day permitted delay period apply?

ANSWER: Yes, according to paragraph 13 of the Offer to Purchase and Contract (form 2-T).  However, effective July 1^st, a new optional check box has been added to the Agreement to Amend Contract form (renumbered as form 4-T) that will allow the parties to agree to a shortened delay period following the new Settlement Date.  If the new box is checked, the delaying party will have 4 days, rather than 14 days, following the new Settlement Date, to complete Settlement and Closing.

NCAR provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.
© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

Can 'Nail Holes" in Sheetrock Be Reason For Termination?

We have all had this happen ...Walk through with buyers the day before closing (after seller has removed all their belongings)...and the buyer freaks about nail holes in Sheetrock where photos or art were previously hanging. What are their options? It depends.... -Eddie Brown-

 

 

Condition of Property at Closing

Release Date: 8/11/2015

QUESTION:  I represent sellers who have their home under contract. The buyers conducted a walk-through, discovered several nail holes in the walls where my clients' pictures were hung, and are now demanding that my clients fill those holes, paint the walls and then professionally clean the entire house. The buyers have said that if my clients refuse to do those things, they would be in breach of the Contract and the buyers would have no obligation to complete their purchase. Are they correct?

ANSWER:  The buyers are not correct.

NCAR's Offer to Purchase and Contract (form 2-T) contains very specific provisions regarding when buyers have the right to terminate a Contract. For example, Paragraph 4 (f) gives buyers the right to terminate a Contract for any reason or no reason during the Due Diligence Period.
The Contract also specifies a few circumstances that enable buyers to terminate the Contract after the Due Diligence Period ends without themselves being in breach of the Contract. The seller’s failure to materially comply with any of the seller’s obligations under Paragraph 8 of the contract is one such circumstance (see Paragraph 8(n) and the warning at the end of Paragraph 4).  Another such circumstance is the non-satisfaction of the contingency set forth in paragraph 11 of the Contract.
Paragraph 11 states that the buyer's obligation to complete the transaction is contingent on the property being "in substantially the same or better condition at Closing as on the date of (the) offer, reasonable wear and tear excepted." The word "substantially" is important because it means that the buyers' performance of the contract will only be excused if the change in the condition of the property is material. While determining whether a change in condition is substantial or material may be difficult in some cases, it is clear that nail holes in the walls would not be considered a substantial or material change under any circumstances. If the buyers refuse to close because of nail holes, they will likely be found to be in breach of the Contract.
Form 2-T does not require sellers to either professionally clean the property or freshly paint the walls prior to Settlement. Therefore, unless the buyers have extracted a separate written agreement from the sellers to clean or paint the property, they have no legal basis to condition their performance on either action.

NCAR provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.
© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.