Attorneys, Referral Fees and Licensing Law

June 4, 2018 | By Charles Botensten

Q: I understand that the New York State Bar Association ("NYSBA") recently released an Ethics Opinion regarding attorneys accepting referral fees from real estate brokers where the attorney refers their client to the real estate broker in the same transaction where the attorney is representing the client.  Can you explain to me what the Ethics Opinion says?

A: In January 2015, the NYSBA issued Ethics Opinion 1043 (the "Opinion"), which concluded that an attorney may not accept a referral fee from a real estate broker where, in connection with the same transaction, the attorney refers the attorney’s client to the real estate broker.  The Opinion reaches this conclusion even if the lawyer is willing to accept the referral fee from the real estate broker in lieu of a payment for legal services from the attorney’s client. Importantly, before drawing this conclusion, the Opinion reiterated the long standing opinion of the NYSBA that an attorney may not represent any party in a real estate transaction in which the attorney is also acting as a real estate broker. 

Important Tips Concerning Attorneys and Real Estate Licensing Law:

Under Section 442-f of the New York Real Property Law (the "RPL"), attorneys are specifically exempt from the provisions of the RPL (the "Exemption"). Thus, pursuant to the Exemption: (i) an attorney does not need to have a real estate broker license in order to collect a real estate brokerage commission in connection with a transaction, (ii) an attorney does not need to have a real estate broker license in order to collect a referral fee from another real estate broker, (iii) if an attorney applies for a real estate broker license, the attorney is not required to meet the education or experience elements of the real estate broker application and (iv) attorneys are not required to meet the continuing education requirements of real estate licensing law in order to maintain the attorney’s real estate broker license.  

If an attorney would like to have a real estate salesperson or associate real estate broker work under the attorney as a real estate broker, the attorney would need to obtain a real estate broker license as the RPL requires that a real estate salesperson or associate real estate broker must be associated with, and supervised by, a licensed real estate broker. In this instance, the Exemption would not be applicable.

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP