Among real estate agents and brokers, some types of referral fees, commissions, and fee sharing are permitted. However, other types of fee sharing are prohibited by Minnesota real estate statutes and regulations. Whether fee-splitting is a “legal commission” or “illegal kickback” depends on the context.
Minnesota’s primary authority on sharing real estate agent and broker fees is contained in Minnesota Statutes section 82.70.
An Agent Should Only be Paid by the Broker.
First, a real estate agent should only be paid by his or her broker. Minnesota Statutes section 82.70, subdivision 1, provides:
Unless authorized in writing by the real estate broker to whom the licensee is licensed or to whom the licensee was licensed at the time of the transaction, a licensee shall not pay and a licensee shall not accept a commission, compensation, referral fee, BPO fee, or other valuable consideration for the performance of any acts requiring a real estate license from any person except the real estate broker to whom the licensee is licensed or to whom the licensee was licensed at the time of the transaction.
See Minn. Stat. § 82.70, subdiv. 1.
Commission-Splitting, Rebates, Referral Fee, & Fees Are Not Prohibited.
Second, neither the broker nor the agent can give or accept anything of value unless one of the following five exceptions applies. The exceptions are for transactions
(1) between a licensed real estate broker or salesperson and the parties to the transaction;
(2) among persons licensed as provided in this chapter;
(3) between a licensed real estate broker or salesperson and persons from other jurisdictions similarly licensed in that jurisdiction;
(4) involving timeshare or other recreational lands where the amount offered or paid does not exceed $150, and payment is not conditioned upon any sale but is made merely for providing the referral and the person paying the fee is bound by any representations made by the person receiving the fee; and
(5) involving a person who receives a referral fee from a person or an agent of a person licensed under this section, provided that in any 12-month period, no recipient may earn more than the value of one month’s rent, that the recipient is a resident of the property or has lived there within 60 days of the payment of the fee, and that the person paying the fee is bound by any representations made by the recipient of the fee.
See Minn. Stat. § 82.70, subdiv. 2.
Undisclosed Compensation is Prohibited.
An agent cannot accept compensation or benefits from anyone if they are related to an expenditure made for a principal. See Minn. Stat. § 82.70, subdiv. 3.
Splitting the Listing Commission with the Buyer’s Agent is Allowed.
Of course, a real estate seller can authorize sharing a commission with the buyer’s agent is permitted. See Minn. Stat. § 82.70, subdiv. 4. For example, the seller might pay a 7% commission to her agent, and a portion of that is shared with a buyer’s agent. This is typical.
Using a Corporation or LLC is Allowed.
A broker or agent can have their fees go into a business entity solely owned by them. See Minn. Stat. § 82.70, subdiv. 5.
Any Closing Agent Fee Must Be Disclosed Ahead of Time in Writing.
Real estate agent fees must be disclosed in writing a least one business day before the real estate transaction closes. See Minn. Stat. § 82.70, subdiv. 6.