BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
AGENTS’/BROKERS’ OBLIGATION TO DISCLOSE REFERRAL FEES
Broker Risk Management (“BRM”) has received a number of questions regarding whether an agent and broker are required to disclose referral fees to their clients and if so, how. The following addresses the current state of the law with recommendations for handling.
Since the National Association of Realtors’ settlement of the commission antitrust non-disclosure cases, it is now recommended that real estate agents and brokers disclose the payment of all referral fees to the principal affected. This does not require disclosure to the unaffected principal. Consider the following examples:
EXAMPLE NO. 1: Buyer is paying buyer’s agent’s commission. Buyer’s agent is paying another agent a 20% referral fee. The required disclosure is that the buyer’s agent disclose to the buyer, and obtain the buyer’s consent to pay, the referral fee.
EXAMPLE NO. 2: Seller is paying listing agent’s commission. Listing agent is paying another agent a referral fee. Listing agent is required to disclose and obtain the consent of the seller before paying that referral fee.
EXAMPLE NO. 3: Seller has agreed in to purchase agreement to pay buyer’s agent’s commission upon the close of escrow. Buyer’s agent is paying a referral fee to another agent. Buyer’s agent is required to disclose and obtain the approval of both the buyer and the seller because both buyer and seller are affected by this referral fee.
The purpose of these disclosures is to ensure full transparency of the payment of commissions, which was the basis of the Spitzer antitrust action and other actions filed against NAR and many large brokerages. If agents are not disclosing these commissions, arguably, they can be considered secret profits and a breach of the agent’s fiduciary or other obligations of good faith to the parties.
The next question is how should these disclosures be made? The California Association of Realtors has created the Realtor Acknowledgement and Disclosures (RAD) form for the agents’ use. However, many of BRM’s clients have expressed concern with regard to the RAD form and reservations about it.
BRM fully supports CAR’s efforts. However, in light of BRM’s clients’ concerns regarding the use of the RAD form, BRM has created an alternative referral disclosure form for its clients to use. A copy of that form is attached to this tip. Either CAR’s RAD form or Broker Risk Management’s alternative referral agreement and disclosure can be used for this purpose.
Please note that BRM will cover the RAD form as part of its webinar being held on September 14, 2026 entitled, “Challenging CAR Forms.”
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management LLP. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry but rather are intended to suggest good risk management practice.