A brokerage wants to implement a new policy that requires all licensees to use a specific mortgage broker, with whom the brokerage has a financial kickback agreement for referrals. Under the Real Estate Act and RECA Rules, is this practice permissible?

Question: A brokerage wants to implement a new policy that requires all licensees to use a specific mortgage broker, with whom the brokerage has a financial kickback agreement for referrals. Under the Real Estate Act and RECA Rules, is this practice permissible?

Answer options: ✅ No, this practice is strictly prohibited as it constitutes an undisclosed conflict of interest and violates rules regarding referral fees and client best interests.

• Yes, as long as the kickback agreement creates a better interest rate for the clients.
• Yes, provided the financial kickback is fully disclosed to the clients in writing before any referral.
• Only if the brokerage provides several mortgage broker options, even with a kickback from one.

Correct answer: No, this practice is strictly prohibited as it constitutes an undisclosed conflict of interest and violates rules regarding referral fees and client best interests.

Explanation: The Real Estate Act and RECA Rules prohibit licensees and brokerages from entering into arrangements that create undisclosed conflicts of interest, especially where a financial benefit is received for referrals which could compromise the licensee's duty to act in the best interests of their client. A kickback arrangement tied to mandatory referrals is explicitly against these principles.