LEASING BONUSES AND REFERRAL FEES

THE BACKGROUND

Florida Statutes section 475 governs the ability or inability to receive or pay compensation when engaging in real estate related services. Real estate related services include things such as appraising, auctioning, selling, exchanging, buying, and most importantly for this article, renting of real property. Only a licensed broker, a person who holds a real estate broker’s license in Florida may receive and pay compensation for these services to other licensed brokers or salespersons. Certain exceptions to the requirement of licensure have been carved out by the legislature, which allows compensation to be paid and received for a real estate related service without the need for a license. For instance, FS 475.011 exempts any “salaried employee of an owner or of a registered broker for an owner, of an apartment community who works in an onsite rental office of the apartment community in a leasing capacity”. Note that the key word here is “salaried”. Through the efforts of the Florida Apartment Association, another exemption was added which allows a referral fee or finder’s fee to be paid in an amount up to $50.00 in cash, a rent reduction or something of value to a resident who refers another resident to the apartment community. Unfortunately, apartments are limited to paying their employees only a salary for leasing activities and paying residents the $50.00 referral fee cap. Many companies knowingly and unknowingly violate this law. There has been little to no enforcement by the Florida Real Estate Commission until very recently, and a number of apartment communities, in particular the licensed real estate brokers of those companies, have come under fire. The penalties are expensive and severe and there are criminal felony implications.

COMPENSATION WHICH AN UNLICENSED EMPLOYEE OF AN APARTMENT COMMUNITY CAN LEGALLY RECEIVE

FS 475.011 exempts on-site employees from the legal requirement of having a broker’s or sales person’s license to receive compensation for leasing. Specifically, it exempts any “salaried employee of an owner, or of a registered broker for an owner, of an apartment community who works in an onsite rental office of the apartment community in a leasing capacity.” From the language of this section, it would appear and has been interpreted by the Florida Real Estate Commission that nothing other than a “salary” can be paid to the property manager or leasing staff. Paying a bonus or giving anything extra of value to the employee when he or she leases an apartment is considered illegal and violative of FS 475. Can the property manager or leasing agent receive a performance bonus each week or month, just as in many other professions where the hard working employee can receive a bonus? It appears that the answer is no, if that bonus is based on the “leasing” or the number of leases which are consummated through the effort of that employee. It our opinion that this prohibition by FS 475 is ridiculous and the law needs to be changed. No harm is being done to the public by paying a leasing agent or property manager a “bonus”; many on-site property managers and leasing agents have far more experience then the majority of property managers who hold Florida real estate licenses, and almost no training or testing in property management is performed or required by Florida law in order to obtain either a sales person’s license or broker’s license. This is not a situation where unlicensed persons such as on-site property managers or leasing agents are in any way infringing upon the livelihood of a licensed person. With all that said, it is our firm’s view that if an apartment manager, leasing agent or any employee of an apartment community is paid anything other than a salary, they risk prosecution by the Florida Real Estate Commission. You have been forewarned and enforcement has begun.

REFERRAL OR FINDERS FEES TO CURRENT RESIDENTS

FS 475.011 specifically allows the payment of a referral fee or finder’s fee to a current resident for referring a new resident to the apartment community. The law exempts “Any property management firm or any owner of an apartment complex for the act of paying a finder's fee or referral fee to an unlicensed person who is a resident in such apartment complex, provided the value of the fee does not exceed $50.00 per transaction”. This means that no license is required by either party to give or receive this finder’s fee or referral fee. The amount given cannot exceed anything valuing more than $50.00 so a $100.00 reduction of rent off to the referring resident, a $100.00 gift certificate to a local restaurant or anything that exceeds $50.00 in value is clearly prohibited. Examples the law gives include a “fee paid, credit towards rent, or some other thing of value provided to a person for introducing or arranging an introduction between parties to a transaction involving the rental or lease of an apartment unit”. The penalty for paying a referral fee in excess of $50.00 is severe, and the person making the payment could be charged with a third degree felony, and the person or corporation making the payments fined up to $5000.00 per occurrence.

OUR RECOMMENDATIONS

You should immediately speak with your corporate attorney if your company has been paying employees anything other than salaries for leasing activities, or you have been giving resident referral or finder’s fees in excess of $50.00, and get advice on how to proceed. We urge you to actively get involved with the Florida Apartment Association, which is continuing its effort at trying to clarify the law and lobbying for the ability of the apartment community employee to be rewarded for a job well done.