Earlier this month, the Kansas Real Estate Commission made several major changes to the Commission’s Guidelines on Permissible Gifts and Gratuities. The intent of the changes is to clarify the application of the state’s existing statutes prohibiting the payment of cash rebates (and cash equivalents) by real estate licensees to unlicensed individuals.
Kansas Law Prohibits a Real Estate Licensee from Rebating Any Portion of a Commission to an Unlicensed Individual
Under K.S.A. 58-3062(a)(3), it is illegal for any Kansas real estate salesperson or broker to rebate any portion of a commission to an unlicensed individual. The most common example of a prohibited rebate is when a real estate licensee rebates a certain percentage of the purchase price of a property back to the buyer or seller in the form of cash.
Although this practice is legal in other states, Kansas law explicitly prohibits a Kansas real estate salesperson or broker from rebating any portion of a commission to an unlicensed individual. As a basic rule of thumb, you should not be providing any money or item of value to an unlicensed individual unless the item meets the criteria established in the Commission’s Guidelines on Permissible Gifts and Gratuities.
Kansas Law Also Prohibits a Real Estate Licensee from Paying a Referral Fee to Another Real Estate Licensee if the Licensee Knows that the Payment of the Referral Fee will Result in a Prohibited Rebate to an Unlicensed Individual
In addition, K.S.A. 58-3062(a)(4) prohibits a Kansas real estate salesperson or broker from paying a referral fee to another real estate broker or salesperson if the licensee knows that the payment of the referral fee will result in the payment of a prohibited rebate to an unlicensed individual. For example, it is illegal under the statute for a Kansas real estate broker or salesperson to pay a referral fee to a real estate licensee in another state if the Kansas real estate licensee knows that the referral fee will be used to provide the funds for a rebate to an unlicensed individual.
Guidance on Complying with the Commission’s Guidelines on Permissible Gifts and Gratuities
In order to ensure that you do not violate Kansas law by providing a prohibited rebate to an unlicensed individual, you should review the Commission’s Guidelines on Permissible Gifts and Gratuities. If you are providing any item of value to an unlicensed individual in the transaction, including a gift card or coupon, use of a moving van or payment for surveys, inspections or property repairs, then you may be violating the Commission’s guidelines unless the total value of the item provided or the payments made are less than 0.5% of the purchase price of the property subject to the transaction.
Before you decide to provide any items of value to an unlicensed individual or agree to pay for any surveys, inspections, repairs, home warranty policies that would otherwise be paid by the client or customer, please carefully review the Commission’s Guidelines on Permissible Gifts and Gratuities and discuss this issue in detail with your supervising broker or brokerage legal counsel. Having said that, you should note that the reduction of your commission that would be due from a client or customer is not considered a gift and will always be permissible under Kansas law.
Need More Information?
If you have any questions on the updated guidelines, please contact Luke Bell, KAR Vice President of Governmental
Affairs at firstname.lastname@example.org or by phone at 785-267-3610 Ext. 2133 for more information.
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