Legally speaking: Can I pay an attorney a commission? (Please say no!)
On July 13, 2015
By Peg Ritenour, OAR Vice President of Legal Services/Administration
The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one addresses the issue of paying a commission to an attorney.
Q: I have been approached by an attorney whose client is interested in a house I have listed. The attorney told me if that if his client buys the property, he expects to be paid the commission that I offered in the MLS. When I asked if he holds a real estate license, he indicated that he does not, because attorneys are exempt from the requirement to be licensed. Is this correct? I don’t want to get in trouble for paying an unlicensed person.
A: Ohio Revised Code Section 4735.01 sets forth those activities that require a real estate license. Included in that list of activities is assisting or directing in procuring prospects for the purchase, sale or lease of real estate or negotiating such a transaction. If this is done on behalf of another person and for any type of fee, commission or other valuable consideration, a real estate license is required.
There are several exceptions to this licensing requirement, including one for attorneys. However, to qualify for the exemption the attorney must be engaging in such activities “in the performance of the attorney’s duties.” Therefore, if the activity by the attorney in procuring a prospect or negotiating the sale, lease, purchase of real estate is done of for a client in the course of providing legal services, the attorney is not required to be a real estate licensee to be compensated for his services. Examples of situations where the exemption would apply would be an attorney who is selling real estate in the course of disposing of the assets of an estate or a business that is dissolving or assisting a client who is purchasing a business that includes the purchase of the building where the business is located. In these situations, the attorney can certainly be paid for his legal services, but these legal fees should be paid by the client who is receiving legal services.
On the other hand, if the attorney is not engaging in such activities in the course of providing legal services for a client, the exemption from the requirement to be licensed as a broker or salesperson would not apply. Thus, if an attorney is only performing real estate services (identifying a potential property for purchase, showing the property, etc.) and is not doing so in the course of providing legal services, the exemption would not apply and he would need to hold a real estate license in order to receive a real estate commission.
It is important to note that even if the attorney does qualify for the exemption from having a real estate license, that does not require a real estate broker to pay him any type of compensation. Clearly because the attorney is not a participant in the MLS a listing broker is not obligated to pay him the commission offered in the MLS. In my opinion if the attorney is claiming he is exempt because he is performing legal services for a client then that client should be paying for the legal services he is receiving.
Tags: legal, Legally Speaking