Sword or Shield? Divided Georgia Court of Appeals Ruling Allows Non-Broker to Use Real Estate Brokerage Statute to Sue for Referral Fee
Real Estate Update
Date: November 17, 2017
A recent split-decision opinion from the Georgia Court of Appeals held that an individual without a real estate license could sue for the collection of a referral fee for brokerage services, in seeming contravention of the Official Code of Georgia Annotated (OCGA). The 6-1 “whole court” decision rested on an exemption in OCGA §43-40-29(a) that relieves an individual who acts “as a referral agent who is not involved in the actual negotiations, execution of documents, collection of rent, management of property, or other related activity which involves more than the mere referral of one person to another and who: (A) Does not receive a fee for such referral from the party being referred; (B) Does not charge an advance fee; and
(C) Does not act as a referral agent in more than three transactions per year” from the restrictions in §43-40-24(a). Section 43-40-24(a) more broadly provides that “[n]o person shall bring or maintain any action in the courts of this state for the collection of compensation for the performance of any of the acts mentioned in this chapter without alleging and proving that he was a licensed broker in Georgia at the time the alleged cause of action arose.”
Some, including the lone dissenter Judge Charlie Bethel, consider the decision surprising given precedent on the issue from both the Georgia Court of Appeals and the Georgia Supreme Court. Judge Bethel’s dissent noted the prior case law and the principle that the exemption in OCGA
§43-40-29(a) is intended to act as a “safe harbor to protect non-brokers who engage only in incidental, non-brokerage activities related to a real estate transaction or who provide referrals without the expectation of receiving compensation,” and is not to be used as “a basis for circumventing the rule that only licensed brokers have standing to sue for a commission.” Conversely, the majority opined that the prior case law was decided before the General Assembly’s relevant amendments to the real estate licensing statute, and thus was inapplicable to the present case.
As a result of this decision, Lisa Denton Turk may proceed in her lawsuit against Oconee Investment Group for breach of contract and unjust enrichment based on Oconee’s failure to honor an agreement to compensate Turk for referring a buyer to purchase lots and trailers at a set minimum price. Though Oconee has already filed its motion for reconsideration, this opinion marks a shift in Georgia jurisprudence regarding the nature of the exemptions in the real estate broker provisions of the Georgia Code.
It is worth noting that prior to his appointment to the Court of Appeals, Judge Bethel was a Georgia state senator. He focused much of his dissent on the court’s statutory interpretation “absent contrary direction from the General Assembly.” Consequently, this opinion may impact the nature in which the General Assembly drafts future legislation.
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*Christina is not admitted to practice in Georgia. She is admitted to practice only in Virginia and the District of Columbia. Her work is supervised by principals of the firm.
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