This question came up recently at the office and I am having trouble finding the answer. Is it legal for an architect (my office) in California to pay a fee to an individual for a project lead?
In this case we were approached by a real estate agent (who is also a friend) asking if we are able to provide a finder's fee for sending a client, who is also his client, our way. They are in the process of purchasing an empty lot and we will, potentially, land the contract for the house. If we land the client, the real estate agent wants a finder's fee.
Legal? Ethical? I know this issue has been dealt with and discussed before... hoping to find a definitive answer.
archinine
Nov 9, 17 10:23 pm
No one is stopping you from paying someone for nothing...legal? Sure. ethical? Depends which side. Smart? That's a hard no.
Real estate agents are king of getting paid for doing close to or completely nothing.
greenlander1
Nov 10, 17 2:51 am
Legal and nothing unethical about it just no reason to pay a fee unless he is adding value. Maybe one could consider a fee if he steers the project into your hands over other architects with a juicy contract.
Maybe just track current transactions via a real estate database and when something goes into 'pending', reach out to the buying agent/ broker. Or become friends with a construction lender who specializes in this type of loan and get referrals.
won and done williams
Nov 10, 17 8:46 am
Why not? If this is a consistent source of new work, I say go for it. However I would be very careful about how you structure any contract with the real estate agent. He or she should only get paid an agreed percentage of the architectural fee after you are paid first. You can build this finders fee into your rates you establish with the home owner, so there's no net loss to you. My guess is that very few of these leads will amount to actual projects, but if this does work out, it could create a nice small project pipeline. Generally I think architects need to be more creative with how they find work and get off their high horses about the "right way to do things."
greenlander1
Nov 10, 17 10:58 am
Couldn't agree more. I would go further to spread out the payment to agent based on the payments to architect in case the project falls through.
On that topic of right way to do things, I remember there was a guy in a corporate office I worked in who supposedly had a whiskey cabinet at his desk so he could pour drinks with clients and I had never seen him even near a drawing. Some people in the office didn't like him because he wasn't an 'architect' and didn't do any work but he singlehandedly brought in almost all of the good paying mixed use work.
( o Y o )
Nov 10, 17 8:54 am
Just because lawyers and RE brokers do it doesn't make it ethical. In fact it's the opposite. If contractors did this we'd all be up in arms.
The idea is to build good will and long relationships, not to monetize every possible interaction. Pretty soon it will be a bidding war for kickbacks.
Aside from the fact that real estate agents are notoriously deficient in ethical principles and that *everyone* hates them. Birds of a feather ....
won and done williams
Nov 10, 17 10:00 am
What is unethical about a referral?
Flatfish
Nov 10, 17 8:22 pm
I'm not sure about California, but in my state (New York) it is illegal to enter any arrangement where you're sharing part of the fee for architectural services with anybody except your business partner, employee, associate in a professional firm or corporation, subcontractor or consultant. So, here at least, you can't make an agreement in which you pay a finder's fee that's based on a percentage of your fee for the project. The suggestion above about not paying the finder's fee until you have the project in hand and basing it on a percentage of your fee would clearly be illegal in New York. In and of itself it's not illegal to pay a fee to someone to send you leads - though the person directing that work your way may be violating their own profession's rules by sending them, depending on their business and financial relationship to those leads.
MyDream
Nov 11, 17 2:12 pm
Yes, especially if the person can add value as well as bringing in the lead. I am working on a new project lead for a outdoor living space. It will have a standalone 35x20 ft enclosure with a brick fireplace, etc. The clients has over 10k for the budget. I plan on putting in an huge amount of effort if I get the project. I contacted a landscape architect and written a proposal and waiting on a response. If I could get something like this it would help out my portfolio a lot and give great recommendations.
archi_dude
Nov 13, 17 12:18 am
Yeah they might need to add another 0 to that budget FYI....
This question came up recently at the office and I am having trouble finding the answer. Is it legal for an architect (my office) in California to pay a fee to an individual for a project lead?
In this case we were approached by a real estate agent (who is also a friend) asking if we are able to provide a finder's fee for sending a client, who is also his client, our way. They are in the process of purchasing an empty lot and we will, potentially, land the contract for the house. If we land the client, the real estate agent wants a finder's fee.
Legal? Ethical? I know this issue has been dealt with and discussed before... hoping to find a definitive answer.
No one is stopping you from paying someone for nothing...legal? Sure. ethical? Depends which side. Smart? That's a hard no.
Real estate agents are king of getting paid for doing close to or completely nothing.
Legal and nothing unethical about it just no reason to pay a fee unless he is adding value. Maybe one could consider a fee if he steers the project into your hands over other architects with a juicy contract.
Maybe just track current transactions via a real estate database and when something goes into 'pending', reach out to the buying agent/ broker. Or become friends with a construction lender who specializes in this type of loan and get referrals.
Why not? If this is a consistent source of new work, I say go for it. However I would be very careful about how you structure any contract with the real estate agent. He or she should only get paid an agreed percentage of the architectural fee after you are paid first. You can build this finders fee into your rates you establish with the home owner, so there's no net loss to you. My guess is that very few of these leads will amount to actual projects, but if this does work out, it could create a nice small project pipeline. Generally I think architects need to be more creative with how they find work and get off their high horses about the "right way to do things."
Couldn't agree more. I would go further to spread out the payment to agent based on the payments to architect in case the project falls through.
On that topic of right way to do things, I remember there was a guy in a corporate office I worked in who supposedly had a whiskey cabinet at his desk so he could pour drinks with clients and I had never seen him even near a drawing. Some people in the office didn't like him because he wasn't an 'architect' and didn't do any work but he singlehandedly brought in almost all of the good paying mixed use work.
Just because lawyers and RE brokers do it doesn't make it ethical. In fact it's the opposite. If contractors did this we'd all be up in arms.
The idea is to build good will and long relationships, not to monetize every possible interaction. Pretty soon it will be a bidding war for kickbacks.
Aside from the fact that real estate agents are notoriously deficient in ethical principles and that *everyone* hates them. Birds of a feather ....
What is unethical about a referral?
I'm not sure about California, but in my state (New York) it is illegal to enter any arrangement where you're sharing part of the fee for architectural services with anybody except your business partner, employee, associate in a professional firm or corporation, subcontractor or consultant. So, here at least, you can't make an agreement in which you pay a finder's fee that's based on a percentage of your fee for the project. The suggestion above about not paying the finder's fee until you have the project in hand and basing it on a percentage of your fee would clearly be illegal in New York. In and of itself it's not illegal to pay a fee to someone to send you leads - though the person directing that work your way may be violating their own profession's rules by sending them, depending on their business and financial relationship to those leads.
Yes, especially if the person can add value as well as bringing in the lead. I am working on a new project lead for a outdoor living space. It will have a standalone 35x20 ft enclosure with a brick fireplace, etc. The clients has over 10k for the budget. I plan on putting in an huge amount of effort if I get the project. I contacted a landscape architect and written a proposal and waiting on a response. If I could get something like this it would help out my portfolio a lot and give great recommendations.
Yeah they might need to add another 0 to that budget FYI....