Referral agreements in abstract are an arrangement where one broker pays another for providing the successful lead. It’s an agreement where the client is diverted to the receiving broker, but the referral is really better conceptualized as being related to the instant representation being diverted [i.e. you refer a residential purchase client, you refer a client to purchase property in Oregon]. It is not like putting a permanent brand on the client, it’s transferring the specific, potential client relationship. If Client is referred to Broker A from Broker B and is wishing to purchase residential property, a purchase of residential property within a reasonable period of time will result in Broker B paying Broker A the referral fee. If Client is referred to Broker A from Broker B with intent to purchase residential property, but later changes their mind and purchases commercial property with Broker B, Broker A is likely not entitled to a referral fee because the original referral was not for a client contemplating commercial purchases. The commercial relationship is a different one that likely did not arise from the referral.
Referral agreements oftentimes lack a definitive expiration date or end date. These open-ended referral agreements are technically valid indefinitely or until a breach of contract, but the reality gets a little more complicated. When there is a legal dispute over the validity of an open ended contract, courts will oftentimes impose a “reasonable time” expiration date on the contract based on the circumstances and the implied agreements of the parties. The “reasonable time” standard is disappointingly vague, but tends to reflect the industry practices and transaction’s context; e.g. if the two agents keep emailing each other every few months and referencing the referral, we’re more likely to say it’s still ongoing because the parties appear to have intended the agreement to continue existing. With the passage of HB 4058 in 2024, Oregon placed a maximum of 2 years on all agency relationships without additional, intentional contracting to extend the agency relationship [the bill prevents N-TRAP agreements that were spreading around the nation]. In other words, without further input, you cannot represent a client for more than 2 years at a time. As a result, it is very likely that any open-ended referral agreement in Oregon that was entered into after January 1, 2025 will no longer be considered valid for any period of time greater than 2 years, as the 2 year mark would have otherwise marked the end of the referring agent’s agent-client relationship. More likely than not, the “reasonable time” for a representation will tend to be shorter than 2 years in any case as the majority of agency relationships are not ongoing for a full two year stint, so be cautious about trying to enforce stale referral agreements.
The Oregon REALTOR® Forms referral agreement was recently updated to include an express expiration date for the referral:
This section can be used to apply a specific date to the referral agreement. It is worth noting that an expiration date that the sending and receiving brokers expressly agree upon can be longer than 2 years without violating the new HB 4058 language. The “reasonable time with a maximum of 2 years” concept is applied through common law to open-ended referral agreements, and a contract with an expressed expiration date is not open-ended.