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The World of Finder's Fees After <i>Futersak v. Perl</i>

BY Mark Morfopoulos
August 23, 2013

Anyone drafting a finder's fee agreement should be aware that they may be walking into a minefield that is waiting to explode if he or she makes a wrong move. The real estate brokerage community throughout the country, together with various citizen watchdog groups, has fought long and hard to make it very difficult for those who do not have a real estate broker's license to be compensated for their involvement in bringing about a real estate deal. These groups claim that unscrupulous individuals who do not have a real estate broker's license (and who may thus not be regulated by state laws and licensing boards) could take advantage of the general public.'

Limited Circumstances

In many jurisdictions, finder's fees have been permitted in limited circumstances. For example, in California, brokers and principals can hire finders to provide leads in a real estate transaction. (Tyrone v. Kelley, 9 Cal.3d 1 [1973]). Typically, if a finder's fee agreement provides that the activities of the finder, as set forth in the agreement, do not cross the line into what would be considered “brokerage services,” the agreement will be legally valid and, thus, enforceable. Moreover, state real estate licensing boards can only regulate people who are engaging in real estate brokerage activities. So long as a finder enters into a private contract that does not deal with any of the activities that regulate real estate brokers, the finder has, in most jurisdictions been permitted to do so, just as they would be allowed to enter into any other private contract.

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