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Commission ratifies advisory opinion: referral gift cards tied to rentals not permissible for licensed firms
Summary
The commission voted to adopt an advisory private‑letter ruling finding a proposed $50 referral gift‑card program — where firms would compensate unlicensed referrers with gift cards and recover part from agents’ commissions — is not permissible under current rules except in narrow closing or broker‑open contexts.
The Tennessee Real Estate Commission unanimously approved an advisory private‑letter ruling Dec. 17 declaring the referral program described in a submitted attorney’s request would not be permissible under current rules.
Anna Matlock read the submitted proposal from a firm that described a referral program paying $50 Amazon gift cards to people (some unlicensed) who refer tenants who sign leases. Matlock told commissioners that, under existing interpretation and recent rule language, "gift cards are only permissible in two different specific instances" — closing gifts and broker‑open houses — and that the agency consistently treats gift cards as the functional equivalent of cash when offered in referral or compensation scenarios.
Commissioners explored possible permutations: whether apartment complexes or management companies offering referral cards would be treated differently; whether salary‑based on‑site leasing staff or corporate exemptions could alter the analysis; and whether the fact the firm proposed deducting half the gift‑card cost from agent commissions would change the legal outcome. Matlock said licensed firms remain constrained: providing cash or cash equivalents tied to transactions is generally impermissible, and the proposed program, as presented, did not fit rule exceptions.
Following discussion, Commissioner Smith moved that the commission adopt the drafted advisory private‑letter ruling (as prepared by counsel); Commissioner Rampey seconded and the motion carried unanimously. Matlock said she would finalize the letter and obtain the chair’s signature for return to the requesting attorney.
Why it matters: The advisory ruling clarifies that referral reward schemes using gift cards or equivalent cash substitutes tied to leases — at least as structured in the submitted proposal — would violate TREC's interpretation of statutory and rule limits on cash payments by licensees. Firms that operate referral programs will need to review structural details and, if appropriate, seek their own advisory opinions or legal counsel before implementing similar marketing programs.
