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Travel Agent Referral Fees OK Under New Commission Rules

By Pamela V. Millward, Associate Legal Counsel

Before September 1, 2002, the Real Estate License Law and Commission rules forbade real estate licensees from compensating or sharing compensation with unlicensed persons for acts that require licensure by the Commission.  However, in September the Commission created a narrow exception to its rules that allowed brokers to pay referral fees to travel agents for procuring a tenant for a vacation rental as defined in the North Carolina Vacation Rental Act.

Under Commission rules, eligible travel agents must be primarily engaged in the business of acting as an intermediary between persons who purchase air, land, and ocean travel services and those who provide these services.  They must spend the bulk of their time arranging travel for others.  In addition, individuals permitted to sell airline tickets by the Airlines Reporting Corporation (ARC) are also eligible for a referral fee under the rules.

To receive compensation from a real estate broker, a travel agent:

• May only introduce the tenant to the broker and in the regular course of the           travel agent’s business.

• May not discuss lease conditions.

• May not negotiate the price of the rental or on behalf of the tenant.

• May not perform any other acts which normally require a real estate license.

• May not engage in brokerage on the pretext of being a travel agent.

• May not seek, or come into possession of, any other monies in connection with the vacation rental.

• May be paid only at the conclusion of the transaction and only by a duly licensed real estate broker. Salespersons may not pay travel agents for referrals.

As for the mechanics of making a referral, before a vacation rental agreement is created between the vacationer and the property manager, the real estate agent must provide the vacationer with a written statement advising him or her to rely only upon the agreement itself and the real estate broker’s statements when deciding whether to undertake the rental agreement.

Finally, real estate brokers must keep accurate records of all payments made to any travel agent for a minimum of three years. This includes the name of the tenant, the property rented and dates of tenancy, name and address of the travel agent, and the amount of the referral.

Brokers implementating this rule change and needing further information may contact the Commission’s legal division.

This article came from the February 2003-Vol33-3 edition of the bulletin.