May a retainer fee be paid directly to an agent?

QUESTION: An agent in my office entered into a buyer agency agreement with a buyer client using the Exclusive Buyer Agency Agreement (Form 201). Their compensation arrangement includes payment of a retainer fee that will be credited toward any compensation due our firm under the Agreement.  My question is, must the retainer fee be deposited into the firm’s trust account, or may it be paid directly to the agent with the firm’s consent?

ANSWER: The retainer may not be deposited into the firm’s trust account, but it may not be paid directly to the agent either. Let us explain.

Paragraph 2(a) of Form 201 clearly indicates that the retainer fee is non-refundable. Whether or not it is credited toward any compensation due the firm under the Agreement, it becomes the property of the firm when it is paid. Because it belongs to the firm, depositing it into the trust account would constitute comingling the firm’s money with money the firm is holding as a fiduciary for others.

The reason the buyer cannot pay the retainer fee directly to the agent is because NC Real Estate Commission Rule 58A.0120(b) (which became effective July 1, 2021) states that “[a]n affiliated broker shall not be paid a commission or referral fee directly by anyone other than their current BIC or the person who served as their BIC at the time of the transaction.” In our view, your firm should consider a retainer fee paid under the terms of Form 201 to be a “commission” as that term is used in the Rule and therefore subject to the Rule. A staff attorney at the Commission has concurred with this view.

For these reasons, the retainer fee should be paid to the firm rather than your agent, and deposited into the firm’s operating account, not the trust account. It may then be paid to your agent according to whatever understanding your firm has with him or her.

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Filed Under: Fees/Commissions,