FACTS:

See Issue.

ISSUE:

Is a brokerage that manages residential, single-family residences permitted to solicit referrals or recommendations from their client base to attract additional business? If so, to what extent, if any, is a brokerage permitted to offer incentives or gifts to non-licensed owners that refer or recommend management services? Specifically, can a brokerage offer one month of free management services to an existing client for successfully recommending a new client?

ANSWER:

See Discussion.

DISCUSSION:

A non-licensee cannot be paid a referral fee from a broker for referring a potential client to the broker. See A.R.S. § 32-2155(A). Accordingly, a broker cannot offer one month of free management services to an existing client if the offer is contingent upon a referral. Any such offer would constitute a referral fee, which is prohibited by Arizona law.

Note: A.R.S.§32-2176 states that a finder’s fee may be paid to an unlicensed person who is a tenant in an apartment complex. The fee may not exceed $200. The tenant may receive multiple finder fees up to five times in 12 months.