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

A Real Estate Referral Agreement is a legally binding document that outlines the terms and conditions under which a real estate agent or broker refers a client to another agent or broker for a specific real estate transaction. It is a crucial document that ensures both parties understand their obligations and rights.

Table of Contents

  1. Introduction

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

  3. Case Laws

  4. Sample Real Estate Referral Agreement

  5. Conclusion

  6. TLDR

Introduction

Real estate referral agreements are common in the real estate industry, particularly when an agent's client is seeking to buy, sell, or lease property outside their own jurisdiction. These agreements help streamline the referral process and ensure that both parties are compensated fairly for their services.

Typical Terms of a Real Estate Referral Agreement

Here are some typical terms that are commonly included in a Real Estate Referral Agreement:

2.1. Parties to the Agreement

The agreement should clearly identify the parties involved, including:

  • Referring Agent/Broker: The agent or broker who is referring the client.

  • Receiving Agent/Broker: The agent or broker who is receiving the referral.

  • Client: The individual or entity who is being referred.

2.2. Referral Fee

The agreement should specify the referral fee that the referring agent/broker will receive. This fee can be a fixed amount, a percentage of the commission earned by the receiving agent/broker, or a combination of both.

  • Fixed Amount: This is a predetermined amount that the referring agent/broker will receive regardless of the final sale price or lease amount.

  • Percentage of Commission: This is a percentage of the commission earned by the receiving agent/broker, which is typically calculated based on the final sale price or lease amount.

  • Combination of Both: This is a combination of a fixed amount and a percentage of the commission earned by the receiving agent/broker.

2.3. Referral Process

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

  • Referral Criteria: The agreement should specify the criteria for referring clients, such as the type of property, the location, and the price range.

  • Referral Communication: The agreement should specify how the referring agent/broker will communicate the referral to the receiving agent/broker, such as by phone, email, or in person.

  • Referral Documentation: The agreement should specify the documentation that will be provided with the referral, such as the client's contact information, the property details, and the client's requirements.

2.4. Confidentiality

The agreement should include a confidentiality clause that protects the client's information and the terms of the agreement. This clause should prohibit the parties from disclosing confidential information to third parties without the other party's consent.

2.5. Termination

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

  • Breach of Agreement: The agreement can be terminated if one party breaches the terms of the agreement.

  • Mutual Agreement: The agreement can be terminated by mutual agreement of both parties.

  • Notice Period: The agreement should specify the notice period required to terminate the agreement.

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 clause may specify that disputes will be resolved through:

  • Negotiation: The parties will attempt to resolve the dispute through negotiation.

  • Mediation: The parties will attempt to resolve the dispute through mediation.

  • Arbitration: The parties will submit the dispute to arbitration.

  • Litigation: The parties will resolve the dispute through litigation.

Case Laws

There are no specific case laws in Kenya that directly address the terms of a Real Estate Referral Agreement. However, the general principles of contract law apply to these agreements.

  • The Law of Contract Act, Cap 23 of the Laws of Kenya: This Act governs contracts in Kenya and sets out the general principles of contract formation, interpretation, and enforcement.

  • The Estate Agents Act, Cap 17 of the Laws of Kenya: This Act regulates the activities of estate agents in Kenya and sets out the requirements for licensing and registration.

Sample Real Estate Referral Agreement

REAL ESTATE REFERRAL AGREEMENT

This Real Estate Referral Agreement ("Agreement") is made and entered into as of [Date], by and between [Referring Agent/Broker Full Name], residing at [Referring Agent/Broker Address] ("Referring Agent/Broker"), and [Receiving Agent/Broker Full Name], residing at [Receiving Agent/Broker Address] ("Receiving Agent/Broker").

WITNESSETH:

WHEREAS, Referring Agent/Broker is a licensed real estate agent/broker in [Country] and has a client who is seeking to [Purpose of Referral, e.g., buy, sell, or lease] real estate in [Location]; and

WHEREAS, Receiving Agent/Broker is a licensed real estate agent/broker in [Country] and is willing to represent the client in the [Purpose of Referral, e.g., purchase, sale, or lease] of real estate in [Location];

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. Referral

Referring Agent/Broker agrees to refer the client to Receiving Agent/Broker for the [Purpose of Referral, e.g., purchase, sale, or lease] of real estate in [Location].

2. Referral Fee

Receiving Agent/Broker agrees to pay Referring Agent/Broker a referral fee of [Referral Fee Amount] for each successful [Purpose of Referral, e.g., purchase, sale, or lease] of real estate to the client. The referral fee will be paid to Referring Agent/Broker upon the closing of the [Purpose of Referral, e.g., purchase, sale, or lease] transaction.

3. Referral Process

Referring Agent/Broker will provide Receiving Agent/Broker with the following information about the client:

  • Client's name and contact information

  • Client's requirements for the [Purpose of Referral, e.g., purchase, sale, or lease] of real estate

  • Any other relevant information that may be helpful to Receiving Agent/Broker

Receiving Agent/Broker will contact the client and provide them with the necessary information and services to facilitate the [Purpose of Referral, e.g., purchase, sale, or lease] of real estate.

4. Confidentiality

Both parties agree to keep confidential all information relating to the client and the terms of this Agreement. This information will not be disclosed to any third party without the other party's consent.

5. Termination

This Agreement may be terminated by either party upon [Notice Period] written notice to the other party. This Agreement may also be terminated by either party for any material breach of this Agreement by the other party.

6. Dispute Resolution

Any dispute arising out of or relating to this Agreement will be resolved through [Dispute Resolution Method, e.g., negotiation, mediation, arbitration, or litigation].

7. Governing Law

This Agreement will be governed by and construed in accordance with the laws of [Country].

8. Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

9. Severability

If any provision of this Agreement is held to be invalid or unenforceable, such provision will be struck and the remaining provisions will remain in full force and effect.

10. Notices

All notices and other communications hereunder will be in writing and will be deemed to have been duly given when delivered personally, sent by certified mail, return receipt requested, or sent by overnight courier service, addressed as follows:

If to Referring Agent/Broker: [Referring Agent/Broker Address]

If to Receiving Agent/Broker: [Receiving Agent/Broker Address]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

[Referring Agent/Broker Signature]

[Referring Agent/Broker Printed Name]

[Receiving Agent/Broker Signature]

[Receiving Agent/Broker Printed Name]

Conclusion

A Real Estate Referral Agreement is an essential document for real estate agents and brokers who are referring clients to other agents or brokers. It helps to ensure that both parties understand their obligations and rights and that the referral process is conducted smoothly and fairly.

TLDR

A Real Estate Referral Agreement is a contract between two real estate agents or brokers where one refers a client to the other for a real estate transaction. The agreement outlines the referral fee, the referral process, confidentiality, termination, and dispute resolution.

Answered by mwakili.com