BRE licensees are restricted in the way they can be paid and can contract for payment for their services. Many licensees know this as a restriction on advance fees. For example, this restricts a licensee from accepting a payment to list and sell a property before the property is sold. That is why licensees receive a commission for the sale of a property after the sale is complete.
The definition of an advance fee is a fee, regardless of the form, that is claimed, demanded charged, received or collected by a licensee for a service requiring a license before fully completing the service the licensee contracted to perform or represented would be performed. Business & Professions Code § 10026. There are exceptions, like rental screening fees and certain advertisement. But, for the most part, it precludes contracting or receiving a fee for a service before the service is completed. That can restrict payment on certain services that real estate agents may provide, such as property managers collecting fees related to payment of taxes for owners or accounting services for clients using money held in a trust account for the client. It also restricts a licensee’s ability to provide eviction insurance, if paid for via a monthly fee. This is a relatively common property management service offered to owners.
If you have any questions regarding whether a charge may be considered an advance fee, please give us a call.