Q: I am a licensed New York real estate broker and I have the following questions regarding the incentives I may provide to a buyer or seller in a real estate transaction:
1. May I advertise the incentive in order to attract new clients?
2. May the incentive come in the form of a gift card?
Is there a limit on the amount that I can offer as an incentive?
A: Real estate brokers ("Brokers") may share a portion of their commission with a purchaser, seller, landlord, or tenant (collectively a "Party to the Transaction") in a real estate transaction as an incentive. This is reflected in Section 442 (2) of Article 12-A of the Real Property Law. Section 442 (2) reads, in part:
"…nothing in this section shall prohibit a real estate broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant who is buying, selling, exchanging, leasing, renting …. Such fee, commission, or other compensation must not be made to the seller, buyer, landlord or tenant for performing any activity requiring a license under this article."
Accordingly, to answer your questions:
1. Yes, you may advertise the incentive. There is nothing in New York State law that prohibits Brokers from advertising an incentive in order to attract new clients. Brokers should ensure that the advertisement otherwise complies with the relevant New York State advertising regulations.
2. Yes, the incentive may come in many forms, including cash, gift cards, services, or other gifts. For example, Brokers may offer a Party to the Transaction a $1,000 gift certificate or a flat screen television as an incentive to use the Brokers’ services.
3. No, there is no prescribed limit on the amount of the gift which may be offered by Brokers. Thus, Brokers may offer an incentive directly to a Party to the Transaction in whatever amount Brokers see fit.
Important Tip: Brokers should speak with their accountant, tax advisor and/or attorney in order to ascertain the tax consequences of offering an incentive to a Party to the Transaction and to ensure that the incentive is properly structured.
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