“Pay at Close” is Illegal, So Don’t Do it!

by | Mar 2, 2018 | Legal Tips

Pay at Close is a process where the Broker in Charge gives written authorization to the closing attorney to issue two checks at closing: one to the brokerage firm for its portion of the commission, and one to the agent for his/her portion of the commission. Recently, we have received numerous requests for “Pay at Close.”  I have started to see forms that some law firms have created to help facilitate these payment schemes.  Since few real estate closing attorneys familiarize themselves with real estate licensee laws, I can only assume that these lawyers do not know that “Pay at Close” is illegal. South Carolina Code §40-57-135(B) states, “An associated licensee may not receive compensation from an activity requiring a real estate license from an entity or person other than the one for which the license is issued.”

On August 17, 2016, the Real Estate Commission heard this matter and interpreted the statute to mean that the Broker may not consent or delegate payment ability to a closing attorney. The Commission UNANIMOUSLY ruled that “Pay at Close” violated the Code and that payment to a licensee can only come from the Broker.  The Commission is enforcing this ruling.

South Carolina REALTOR Association legal counsel, Byron King, and I discussed this matter last week. Byron told me that “the reason for the law originally was that licensees were taking too much money or not even telling the BIC about the closing and taking all of the money.”  Therefore, the law was put into place.  It is surprising that the BICs would now want to give up their protections when wire transfers can pay a distant associated licensee much faster than checks can be cashed from the law firm.

If you participate in “Pay at Close” and the Commission discovers it, you can, and most likely will, receive punishment. Getting paid a day early is not worth having a published Order issued against you stating that you broke the law.  Remember all Orders are public record and easily found on any internet search.

WHAT A GREAT YEAR 2017 WAS FOR BLAIR CATO: Gary Pickren was just named Closing Attorney of the Year by the Sales & Marking Council and was earlier named Associate Member of the Year by the Building Industry Association of Central South Carolina. Rex Casterline was named Best Lawyer by the readers of The State.  Cynthia Blair was elected President of the American Land Title Association (ALTA) and the law firm was named Best Law Firm by the readers of The State.


Photo by gcaserotti

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