Limitations on rewards for referrals - Settlement industry bulletin issue 103
24 June 2021
Limitations on rewards for referrals
Consumer Protection recently became aware of some settlement agents may be using creative methods to get around the prohibition on rewards for referrals. This bulletin aims to remind settlement agents of their obligations under the law. A similar bulletin has been sent to the real estate industry.
What is a reward for referral?
We consider a 'reward for referral' to be where a person, including a real estate agent, sales representative or property manager, receives a reward, benefit or incentive for the referral of business to a settlement agent.
The reward is not limited to monetary payment. It can be indirect and include:
- distribution of income via company and unit trust structures
- free title searches
- gifts such as wine, football tickets, or holidays
- free secretarial services
- free office space and equipment or
- paying more than market value to real estate agents for rental of office space.
What does the law say?
Section 44(8) of the Settlement Agents Act 1981 (SA Act) prohibits a licensed settlement agent from paying or giving any direct or indirect reward to a person in return for referrals of business relating to the functions of a settlement agent.
In addition, section 44(7) of the SA Act prohibits any person, including a real estate agent or sales representative, from directly or indirectly demanding, receiving or holding any rewards for referring business involving the performance of the functions of a settlement agent.
What if I breach the law?
Consumer Protection may investigate an allegation of settlement agents engaging in the practice of rewards for referrals.
Offences under the above section of the SA Act can result in criminal or disciplinary action, such as the possibility of the cancellation, disqualification or suspension of a licence. It can also attract a fine of up to $20,000.
Other persons in the real estate industry who breach requirements may also be subject to investigation, potential criminal or disciplinary action and penalties.
Settlement agents who become aware of rewards for referrals arrangements are invited to lodge a complaint with us.
This bulletin contains general information obtained from internal and external sources to the Western Australian Department of Energy, Mines, Industry Regulation and Safety. While we use our best endeavours to ensure the information is correct and current at the time of publication, changes in circumstances after that time may impact upon the accuracy of the material. It is your responsibility to ensure the information is still correct when applying it to your situation in the future, including seeking independent professional advice. More information is available on our Disclaimer page.
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