It is no secret that many corporate relocation companies have found it child's play to extort millions of dollars from the real estate agent's commissions. How? By demanding a so-called "referral fee" from the agent that is representing the buyer or seller in a given transaction, after the agent/client relationship was initiated.

One might think the agent can simply say, "No, I am not paying a referral fee to anyone when they did not send me a valid referral." As the agents all know, it is not quite that simple.

Once an agent indicates unwillingness to pay the fee demand, the relocation firms have typically stepped up their attack on the agent's commission by bullying and intimidating the agent and the transferee. Common tactics include threats that the agent will never receive future business from the relocation company and threats that the transferee will lose their moving benefits.

How then can an agent protect their commission and their client's benefits from relocation company attack? There are a number of things. First and perhaps foremost, the agent needs to believe in their own heart that what is happening to them is wrong and they must have a willingness to do something about it. Second, the agent needs to understand what violations are being committed by relocation companies when they conduct business in the fashion described above. Third, the agent needs to know who they can report the relocation companies to when they commit these violations.

With respect to the first point, all the education, information and knowledge on the subject will do no good if an agent is not willing to make some effort in protecting themselves and their income when it comes under attack. It is always easier to turn away from conflict or confrontation. This is exactly what the relocation companies are banking on.

When acting in ways described above, relocation companies are committing acts of extortion. In addition, they are violating a number of laws including unjust enrichment, restraint of trade, duress and possibly tortuous interference.

Unjust enrichment is a RESPA law violation and is reportable to the Department of HUD. RESPA regulations are that no fee can be charged, received or paid in a real estate transaction without due cause. In other words, any fee charged must be earned and deserving in order to be paid or received.

A restraint of trade violation occurs when a relocation company attempts to block or prevent a real estate agent from entering into a normal contractual relationship with a prospective buyer or seller unless the real estate agent agrees to pay a so-called "referral fee" to the relocation company. This can also be deemed as demanding a "kickback". This violation needs to be reported at once to the Attorney General's office in the agent's state as well as in the state where the relocation company conducts its business.

Duress is oftentimes inflicted upon both the agent and the transferee by the relocation company. It is not at all uncommon for the relocation company to demand an agent's signature relinquishing huge sums of the agent's commission simply in order to allow the agent to obtain the listing. On numerous occasions relocation companies have shown up at the time an offer was being presented and demanded a "referral fee". If the agent refused to pay, the relocation company would not sign the purchase agreement (on behalf of the transferee) and informed the transferee that the agent was delaying the sale due to their non-cooperation. When agents and transferees are forced to sign documents they would otherwise not sign they are signing under duress. When this happens, agents must report the incident to the Attorney Generals in both states.

Tortuous interference is the interfering by one real estate licensee with a contractual relationship between another real estate licensee and their client. This is a violation of license law in every state. This law is broken every time a relocation company speaks with a transferee or the transferee's agent about a referral fee after a contractual relationship has begun. This violation is reportable to the real estate commissioner and has a penalty. Keep in mind, in order to receive a referral fee at all, the relocation company must hold a valid real estate license, and presuming they do, they violate the tortuous interference law when they as much as suggest a fee be paid them from another agent who is already under contract with the client.

To date, several states including Tennessee, Colorado and Iowa have made it illegal for relocation companies to demand after-the-fact fees from agents within their jurisdictions. Referral fees must be earned, even by relocation companies whose policy it is to step between an already established client-agent relationship. But until all states protect the agent from after-the-fact referral fee extortion, agents will have to take matters into their own hands.

Editor's note: There is now help for real estate agents who object to paying unwarranted fees to relocation companies. Visit http://www.scislow-systems.com for more information. Services are also provided for a fee and include pre-written and addressed complaint letters to every Attorney General and real estate commissioner in the nation. Call toll free (877) 283-2248 for details.

Published: May 26, 2000

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