Feb. 10, 2006 - Case #6-4: Acceptance of Rebates from Contractors

(Revised Case #16-4 May, 1988. Transferred to Article 6 November, 1994.)

REALTORŪ A, who managed a 30-year-old apartment building for Client B, proposed a complete modernization plan for the building, obtained Client Bs approval, and carried out the work. Shortly after completion of the work, Client B filed a complaint with the Board of REALTORSŪ charging REALTORŪ A with unethical conduct for receiving rebates or kickbacks from the contractors who did the work.

At the hearing, Client B presented written statements from the contractors to substantiate his charges.

REALTORŪ A defended himself by stating that he had carried out all work involving the preparation of specifications, solicitation of bids, negotiations with the contractors, scheduling work, and supervising the improvement program; that he had presented all bids to the owner who had authorized acceptance of the most favorable bids; and that he and Client B had agreed on an appropriate fee for this service.

REALTORŪ A also presented comparative data to show that Client B had received good value for his money.

After all of the contracts were signed and the work was under way, REALTORŪ A found that his fee was inadequate for the time the work required; that he needed additional compensation but didnt want to add to his clients costs; and that when he explained his predicament to the contractors and asked for moderate rebates, they agreed.

Questioning by panel members revealed that the contractors felt that since they were being asked for rebates by the man who would supervise their work, they felt that they had no choice but to agree.

The Hearing Panel concluded that REALTORŪ A was in violation of Article 6 of the Code of Ethics and that if he had miscalculated his fee with Client B, his only legitimate recourse would have been to renegotiate this fee with Client B.