Section 12-61-113(1)(j) of the license law forbids a broker from paying a commission or valuable
consideration, for performing brokerage functions, to any person who is not licensed as a real estate broker.
Pursuant to Colorado case law “negotiating” means “the act of bringing two parties together for the
purpose of consummating a real estate transaction” Brakhage vs. Georgetown Associates, Inc., 523 P 2d 145 (1974). Therefore, any unlicensed person who directly or indirectly brings a buyer and seller together, is negotiating and would need a broker’s license in order to be compensated. This includes, but is not limited to,such activities as referring potential time-share purchasers to a developer or referring potential purchasers to a homebuilder.
Payment for general promotion of a real estate business is not prohibited. Contracting with newspapers, catalog companies of general circulation or with institutional advertisers such as radio, television or any other media, is not prohibited provided the activity does not otherwise constitute offering, negotiating, listing, selling, or leasing real estate as defined in 12-61-101(2). Payment based on the successful sale or lease of real estate does not in itself constitute brokering as so defined. However, in the past, the Commission has determined that many so-called advertising services actually involved brokering activities. The method of payment is often an important factor in determining whether the activity requires a license.
Payment for providing a name to a licensed broker is not specifically addressed in the license law.
However, it would be illegal to pay such a fee to anyone performing acts that require a license (i.e., negotiating, listing, contracting). Care should be taken. At best, the unlicensed referrer can have no active involvement in the transaction beyond merely giving to a licensee the name of a prospective buyer, seller or tenant. If the payment is simply for the referral of a name to a licensee, with no further activity on the part of the referrer, and the referrer is not a provider of a settlement service, the Commission will not consider it to be a violation of the license law. Complaints and inquiries are dealt with on a case-by-case basis.
For more information, Contact Us or visit the CREC website page re this subject (Section CP2).