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What are the typical terms for a Real Estate Referral Agreement?
Introduction
A Real Estate Referral Agreement is a contract between a referring party (often a real estate agent or broker) and a receiving party (another real estate agent or broker) where the referring party agrees to refer a client to the receiving party in exchange for a referral fee. In Kenya, such agreements are governed by various laws and regulations, including the Law of Contract Act, the Estate Agents Act, and the general principles of contract law as outlined in the Kenyan legal framework.
Table of Contents
Legal Framework
1.1 Law of Contract Act
1.2 Estate Agents Act
1.3 General Principles of Contract Law
Key Terms in a Real Estate Referral Agreement
2.1 Identification of Parties
2.2 Description of Referral Services
2.3 Referral Fee
2.4 Payment Terms
2.5 Confidentiality
2.6 Termination
2.7 Dispute Resolution
2.8 Governing Law
Conclusion
1. Legal Framework
1.1 Law of Contract Act
The Law of Contract Act (Cap 23) is the primary legislation governing contracts in Kenya. It outlines the essential elements of a valid contract, including offer, acceptance, consideration, and the intention to create legal relations.
Offer and Acceptance: The agreement must clearly outline the offer made by the referring party and the acceptance by the receiving party.
Consideration: The referral fee serves as the consideration in this agreement.
Intention to Create Legal Relations: Both parties must intend for the agreement to be legally binding.
1.2 Estate Agents Act
The Estate Agents Act (Cap 533) regulates the activities of estate agents in Kenya. It ensures that only licensed individuals or entities can engage in real estate transactions, including referral agreements.
Licensing: Both the referring and receiving parties must be licensed estate agents.
Code of Conduct: The Act outlines the ethical standards and professional conduct expected of estate agents.
1.3 General Principles of Contract Law
General principles of contract law, as established by common law and judicial precedents, also apply to real estate referral agreements. These principles include:
Capacity: Both parties must have the legal capacity to enter into the agreement.
Legality: The agreement must be for a lawful purpose.
Certainty: The terms of the agreement must be clear and unambiguous.
2. Key Terms in a Real Estate Referral Agreement
2.1 Identification of Parties
The agreement should clearly identify the parties involved:
Referring Party: The individual or entity making the referral.
Receiving Party: The individual or entity receiving the referral.
2.2 Description of Referral Services
The agreement should provide a detailed description of the referral services to be provided:
Client Information: Details of the client being referred.
Nature of Services: The specific real estate services the receiving party is expected to provide to the referred client.
2.3 Referral Fee
The referral fee is a crucial component of the agreement:
Amount: The specific amount or percentage of the transaction value to be paid as a referral fee.
Conditions: Any conditions that must be met for the referral fee to be payable, such as the successful completion of a real estate transaction.
2.4 Payment Terms
The agreement should outline the payment terms for the referral fee:
Timing: When the referral fee will be paid (e.g., upon closing of the transaction).
Method: The method of payment (e.g., bank transfer, cheque).
2.5 Confidentiality
Confidentiality clauses are essential to protect the interests of both parties:
Client Information: Both parties must agree to keep client information confidential.
Non-Disclosure: Any other confidential information shared between the parties should not be disclosed to third parties.
2.6 Termination
The agreement should include terms for termination:
Notice Period: The notice period required for either party to terminate the agreement.
Conditions: Any specific conditions under which the agreement can be terminated (e.g., breach of contract).
2.7 Dispute Resolution
Dispute resolution mechanisms should be clearly outlined:
Negotiation: Initial attempts to resolve disputes through negotiation.
Mediation/Arbitration: Provision for mediation or arbitration if negotiation fails.
Jurisdiction: The jurisdiction under which any legal disputes will be resolved.
2.8 Governing Law
The agreement should specify the governing law:
Kenyan Law: The agreement should be governed by the laws of Kenya, as per the Law of Contract Act and other relevant legislation.
Conclusion
A Real Estate Referral Agreement in Kenya must be carefully drafted to ensure it complies with the Law of Contract Act, the Estate Agents Act, and general principles of contract law. Key terms such as identification of parties, description of referral services, referral fee, payment terms, confidentiality, termination, dispute resolution, and governing law must be clearly outlined to protect the interests of both parties and ensure a smooth referral process. By adhering to these legal requirements and best practices, estate agents can effectively manage their referral relationships and enhance their professional conduct in the real estate industry.
Answered by mwakili.com