The Georgia Court of Appeals has issued a ruling which could be important to certain types of real estate investors in Georgia. In the case of Oconee Investment Group, LLC v Turk, the Court held that an individual was not barred from pursuing a legal claim for a real estate referral fee, even though she held no real estate license.
The code section at issue is O.C.G.A. § 43-40-29a(9), dealing with certain exceptions to the requirement of a real estate license. For wholesalers and “bird-dogs” who are doing fewer than 3 transactions per year, this case provides a slightly stronger footing to enforce referral fee agreements, if a dispute arises. The code section states that Chapter 40 of Title 43 (relating to the requirement of a broker’s license in certain circumstances) DO NOT APPLY to :
“[a]ny person acting as a referral agent who is not involved in the actual negotiations, execution of documents, collection of rent, management of property, or other related activity which involves more than the mere referral of one person to another and who:
(A) Does not receive a fee for such referral from the party being referred;
(B) Does not charge an advance fee; and
(C) Does not act as a referral agent in more than three transactions per year.”
The reason this case is important is that the issue of whether or not a “referral agent” may sue on any agreement for his/her fee had not yet been addressed by the appellate courts. Even as important as this is for certain Georgia real estate investors, the ruling is VERY NARROW. To fall under this exception, you can’t negotiate the price, but only make the introduction/referral. Once you step outside these very specific guidelines, you no longer qualify, and could potentially face sanctions (or even criminal prosecution) for acting as a Real Estate Licensee without holding such a license. Even if you do fall under the exceptions as outlined in the case, there are exceptions to the exceptions which would still require you to hold the license. For instance, in that same code section, in a later paragraph, the statute states “(b) The exceptions provided by subsection (a) of this Code section shall not apply to any person, other than an owner or individuals who are full-time employees of the owner, who performs the acts of a broker on property required to be registered under Article 1, 2, or 5 of Chapter 3 of Title 44.” (these particular exceptions apply to certain specialized land transactions).
The other thing to keep in mind about this ruling is that it does not say that what the investor did was allowed or not, or whether she will win her case or not; it simply said that she was not barred from bringing her case to court in order to seek her fee. Whether she can prove her case or justify the fee will still continue to be litigated as the case moves forward in the lower court.
In short, for a very narrow niche of a certain type of investor, this ruling can make a big difference. If, though, you’re not 100% sure that you meet its guidelines, getting your license is probably still a better (and in the long run, cheaper) option.
As always, pleases feel free to reach out to our office with any Georgia Real Estate questions you may have.