Finder’s Fees in Real Estate | What You Must Know

Have you ever thought about paying a friend for sending a home buyer your way? Or maybe someone offered you a “cut” for referring a family member to a specific agent?

This payment is often casually called a “finder’s fee.” While it might seem harmless, it’s one of the most misunderstood and legally risky areas in Canadian real estate.

This guide will walk you through what a finder’s fee really is, why it’s a big deal, and what the rules are in every province.

What is a “Finder’s Fee” in Real Estate?

In plain language, a finder’s fee is money (or any other benefit) paid to someone just for bringing a buyer and seller together.

In real estate, you'll often hear three terms used for the same idea:

Finder’s Fee: The casual, slang term people use. (e.g., "I’ll pay you $500 if your contact buys this house.")
Referral Fee: The official word regulators use. It’s still money paid for a referral.
Commission: The formal payment a licensed real estate brokerage (the company an agent works for) earns for successfully helping someone buy or sell property.

From a regulator's point of view, it doesn't matter what you call it. If:

The payment is tied to a real estate deal closing, and
Someone is getting paid for making that connection...

…then you are in regulated territory. It’s not “just a thank-you gift.”

The Core Rule Across Canada: You Can’t Pay Just Anyone

Every province in Canada has its own real estate laws, but they all follow the same core rule:

Only licensed real estate brokerages and the agents registered with them are allowed to “trade in real estate” and be paid for it.

“Trading in real estate” is a very broad term. It includes obvious things like negotiating an offer, but it also includes activities that “help a real estate deal happen” in exchange for a fee.

Unlicensed people are not allowed to do these things for payment. Here are a few examples of the provincial rules:

Ontario: The law (called TRESA) states that a person who is not registered as a brokerage or agent “shall not trade in real estate.”
Manitoba: The rules “prohibit paying a fee to an unregistered person for the furtherance of a transaction in real estate.” They specifically call out “bird-dog fees” (another slang term for finder’s fees) for referring buyers or sellers.
Alberta: The regulator (RECA) says a brokerage must not pay a referral fee to an unlicensed person if that person’s activities fall under the definition of trading in real estate.

So even if you call it a “bonus” or a “marketing fee,” regulators will look at what it really is: getting paid for being involved in a real estate deal without a license.

How Each Province Treats Finder & Referral Fees

Here’s a province-by-province snapshot, simplified for everyday understanding.

Ontario

The Law: Trust in Real Estate Services Act (TRESA)
The Regulator: Real Estate Council of Ontario (RECO)
In Practice: Paying a "bird-dog" fee to an unlicensed person for a lead has been treated as improper by RECO and has led to agents being disciplined.
For You: If someone (like a friend or neighbour) says, "I’ll get a cut if you use this agent," that person is likely breaking the rules unless they are also a licensed agent. Licensed agents can receive referral fees (e.g., from a mortgage broker), but they must disclose it to you, and the money must be handled by their brokerage.

British Columbia

The Regulator: BC Financial Services Authority (BCFSA)
In Practice: B.C. is one of the very few provinces that explicitly allows limited referral fees to unlicensed people, but the rules are strict.
For You: A member of the public can sometimes receive a referral fee, but only if they aren't actively soliciting clients or doing anything that requires a license (like advising you). They also cannot run a "referral business" as their main activity. It's a narrow exception that is rarely used.

Alberta

The Regulator: Real Estate Council of Alberta (RECA)
In Practice: RECA is very clear. A brokerage can only pay an unlicensed person a referral fee if what they did doesn't require a license.
For You: If the person's activity looks at all like "trading in real estate" (e.g., finding you, qualifying you as a lead, advising you), then no referral fee is allowed. All legal referral fees must flow through the brokerage, not be paid directly from agent to agent.

Manitoba

The Law: The Real Estate Brokers Act
In Practice: Manitoba's Real Estate Commission is unusually blunt about this. They state it is prohibited to pay a fee to an unregistered person for helping a transaction, including "bird-dog fee" arrangements.
For You: Manitoba treats these informal finder's-fee arrangements as exactly what they are: illegal payment for unlicensed real estate activity.

Saskatchewan

The Regulator: Saskatchewan Real Estate Commission (SREC)
In Practice: SREC's materials emphasize that only registered agents may assist in a real estate transaction for payment. There is no friendly "finder’s fee" loophole.
For You: The safe assumption in Saskatchewan is simple: No paying unlicensed "finders" for leads that result in a sale.

Nova Scotia & Atlantic Region

The Regulator: Nova Scotia Real Estate Commission (NSREC) (other Atlantic provinces are similar).
In Practice: All payment, including referral fees, must be paid to the brokerage, which then pays the agent. The law makes it an offence to trade in real estate without a license.
For You: New Brunswick, PEI, and Newfoundland & Labrador all follow the same structure. If it’s payment tied to a real estate deal, it must be handled inside the licensed system.

Québec

The Regulator: OACIQ (for real estate)
In Practice: Québec's regulator (OACIQ) treats referral payments as part of a real estate transaction. This means the payment must be recorded and handled by the licensed brokerage.
For You: The pattern is the same. Referral fees are part of formal, regulated brokerage practice—not something done casually with unlicensed people.

**So, What Does a Legal Referral Fee Look Like?**

When done legally, a “finder’s fee” is really a referral fee between two licensed brokerages.

Here are common, 100% legal examples:

This is how compliant professionals handle referrals. It’s transparent, documented, and professional.

Tax Treatment of Finder / Referral Fees (High-Level)

The Canada Revenue Agency (CRA) has a simple view: a finder’s fee is taxable income.

A few key points:

CRA recognizes finder’s fees as part of the expenses or income around business and property transactions:
- Business expense guidance lists loan brokerage and finder’s fees as deductible, usually over five years, when you borrow to buy business property. (Source: Canada.ca)
- For capital gains, CRA explicitly lists finder’s fees and commissions as deductible outlays when disposing of property. (Source: Canada.ca)
In a real-estate referral context, CRA has ruled that if a brokerage pays a “referral fee” portion of commission to a buyer on direction of the agent, that amount is still income to the agent and must be reported, even if the buyer also benefits. (Source: Tax Interpretations)
Referral income can also attract GST/HST if the person or corporation earning it is carrying on a business and is registered (or required to be registered).

So:

For agents/brokerages – referral fees are fully taxable business income.
For consumers – any unusual “rebates” or “referral cheques” may have tax consequences; always check with an accountant.

Common Traps to Avoid

From a practical point of view, here are the patterns that cause the most trouble.

Trap 1: “I’ll pay you if your cousin lists with me.” This is the classic mistake. If your cousin is just helping you as family, no problem. The moment money is promised based on the deal closing, your cousin is being paid for “helping a trade.” In most provinces (like Ontario and Manitoba), this is not allowed.

Trap 2: “I’m just making an introduction, I’m not negotiating.” This argument doesn’t work. Regulators don’t require you to draft the offer to be “trading in real estate.” In Manitoba, simply referring someone for a “bird-dog fee” is prohibited. Alberta and B.C. have a very narrow space where an unlicensed person might be paid for a simple introduction, but only if they don’t solicit and aren’t in the “business” of referrals. It’s a tiny legal target to hit.

Trap 3: “We’ll call it a marketing fee instead of a referral fee.” Changing the label doesn’t change the substance. If the payment is triggered by a specific deal closing, regulators will see it as payment for that deal, not as generic marketing.

What Compliant, Professional Agents Do

Responsible brokers and agents build their business on trust and following the rules. Here is how they handle this:

All Money Flows Through the Brokerage: No side deals. No cash. No agent-to-agent personal cheques. Everything is documented and auditable.
Referral Agreements are Formal: They are always in writing, between brokerages (not just agents), and include clear client consent and disclosure.
They Do Not Pay Unlicensed "Bird Dogs": It’s not worth risking a license. They know that regulators in provinces like Manitoba literally use the term "bird-dog fee" as an example of what not to do.
They Encourage You to Verify: A good agent will be happy you're informed. They'll tell you that you can (and should) look them up on your provincial regulator's public registry to confirm they are licensed.
They Prioritize Compliance: A professional's first thought is: "Does this follow the rules? Is it clear and fair to my client? And is it documented properly for tax purposes?"

Key Takeaways for You

If you strip away all the legal language, the rules for finder’s fees in Canada come down to this:

Finder’s fees are really referral fees tied to a regulated real estate transaction.
Only licensed agents and brokerages should be paying or receiving this money.
Unlicensed “bird-dog” payments are a major legal risk in almost every province and explicitly prohibited in many.
Every dollar in referral or finder’s fees is taxable income and may also have sales tax (GST/HST) obligations.

When in doubt, always ask these three questions:

Is everyone involved properly licensed for what they’re doing?
Is this payment being handled professionally through a brokerage?
Has everyone, especially the client, been told about it in writing?

The Truth About “Finder’s Fees” in Canadian Real Estate: A Complete Guide