Ask a lawyer:
What are the typical terms for a Real Estate Referral Agreement?

Table of Contents

1. Introduction

2. Typical Terms of a Real Estate Referral Agreement 2.1. Parties 2.2. Referral Fee 2.3. Referral Process 2.4. Confidentiality 2.5. Termination 2.6. Dispute Resolution

3. Conclusion

Introduction

This response will address the typical terms found in a Real Estate Referral Agreement in Kenya. It will draw upon relevant legal principles and provisions from the Kenyan legal framework, including the Law of Contract, the Real Estate Act, and the Consumer Protection Act.

2. Typical Terms of a Real Estate Referral Agreement

A Real Estate Referral Agreement is a legally binding contract between two real estate agents or brokers, where one party (the referring agent) agrees to refer potential clients to the other party (the receiving agent) in exchange for a referral fee. The agreement outlines the terms and conditions governing the referral process, including the payment structure, responsibilities of each party, and dispute resolution mechanisms.

2.1. Parties

The agreement should clearly identify the parties involved, including their full names, addresses, and contact information. It should also specify the capacity in which each party is acting, whether as an individual, a partnership, or a limited liability company.

2.2. Referral Fee

The agreement should clearly define the referral fee structure, including:

• Percentage: The percentage of the commission earned by the receiving agent on the successful sale or lease of the property that will be paid to the referring agent.

• Fixed Amount: A fixed amount payable to the referring agent for each successful referral, regardless of the commission earned by the receiving agent.

• Minimum Fee: A minimum fee payable to the referring agent, even if the receiving agent does not earn a commission on the transaction.

• Payment Schedule: The timeframe within which the referral fee will be paid to the referring agent, typically after the completion of the transaction.

2.3. Referral Process

The agreement should outline the process for referring clients, including:

• Referral Criteria: The specific types of clients or properties that are eligible for referral.

• Referral Communication: The method of communication to be used for referring clients, such as email, phone, or written referral form.

• Referral Documentation: The documentation required to be provided by the referring agent when referring a client, such as the client's contact information, property details, and any relevant agreements.

• Client Consent: The requirement for the client to consent to the referral and the sharing of their information with the receiving agent.

2.4. Confidentiality

The agreement should include a confidentiality clause that prohibits the parties from disclosing confidential information obtained during the referral process. This includes information about the client, the property, and the terms of the transaction.

2.5. Termination

The agreement should specify the conditions under which the agreement can be terminated, including:

• Breach of Agreement: Termination for breach of any of the terms and conditions of the agreement.

• Notice Period: The required notice period for termination, typically 30 days.

• Termination Fee: Any applicable termination fees payable by the terminating party.

2.6. Dispute Resolution

The agreement should include a dispute resolution clause that outlines the process for resolving any disputes that may arise between the parties. This may include:

• Negotiation: An attempt to resolve the dispute through negotiation between the parties.

• Mediation: Referral of the dispute to a neutral third party for mediation.

• Arbitration: Binding arbitration by a qualified arbitrator.

• Litigation: Resorting to legal proceedings in a court of law.

Conclusion

A well-drafted Real Estate Referral Agreement is essential for establishing a clear and legally binding framework for referral relationships between real estate agents or brokers in Kenya. The agreement should address all relevant aspects of the referral process, including the referral fee structure, confidentiality obligations, termination provisions, and dispute resolution mechanisms. By adhering to these terms, parties can ensure a smooth and mutually beneficial referral process.