This article from the UK confirms that ‘referral fees’ are a perennial problem. The problem with referral fees is that they are inevitably illegal secret commissions. This is because estate agents who refer clients to fee-paying conveyancers and lawyers never disclose the fact that the referral is actually a nice little earner.
We have even reached the point where apps are being created by large conveyancing businesses and provided to estate agents so that they can keep their hands clean. The agent sends the client to the app on the basis that the client will receive some form of assistance, but the true purpose of the app is to link the client to the conveyancing business. At the end of the year the agent is paid a “fee” for having used the app.
“The estate agency press have this morning reported on a review by the National Trading Standards Estate and Letting Agency Team which recommends the mandatory disclosure of referral fees to consumers.
The review was requested by the Ministry for Housing, Communities and Local Government (MHCLG) instructed to look into the practice of referral fees and their impact on buyers and sellers in the UK property market.
In a recent survey of TPO (The Property Ombudsman) members, almost 60% of members had referred customers to external companies. More than 80% of those members admitted receiving a fee for the referral.”