Provider fee markups: the invoice question to ask

Why this matters

Vendors typically encounter three or four agency-referred service providers during a sale: a building inspector (for the pre-sale report), a photographer, possibly a stager, and in some cases a lawyer or conveyancer. Each has a fee that appears on the marketing-budget invoice or as a separate vendor cost.

The agency's involvement in the referral can take several forms:

• Pure referral — the agency recommends the provider; the vendor engages and pays the provider directly. No agency involvement in the money.
• Pass-through — the agency arranges the work and invoices the vendor for the exact amount the agency paid the provider. No retained margin.
• Markup — the agency arranges the work, pays the provider a certain amount, and invoices the vendor a larger amount. The difference is agency margin.
• Referral fee — the agency recommends the provider, the vendor pays the provider directly, and the provider pays the agency a referral fee from the provider's own invoice.

All four are lawful under NZ law if disclosed. Rules 9.14 and 9.15 of the Professional Conduct and Client Care Rules 2012 require licensees to disclose any benefit received from a recommendation. The disclosure must be in writing, to the client, and must include the fact of the recommendation. Formulaic disclosure ("we may receive a referral benefit") does not satisfy the rule where a specific benefit is received.

What Rule 9.15 actually says

The verbatim text of Rule 9.15:

"A licensee must not recommend as service providers persons from whom the licensee, or any employee or agent or associate of the licensee's, directly or indirectly, receives any benefit or advantage unless that benefit or advantage, and the fact of any such recommendation, is disclosed in writing to the client and any prospective client."

Three elements to unpack:

• "Any benefit or advantage" — the language is broad. It captures referral fees, markups, rebates, reciprocal benefits, and anything else of commercial value.
• "Directly or indirectly" — captures benefits flowing via the agency, an associated entity, or an employee.
• "In writing" — a verbal disclosure is not compliant. The benefit must be disclosed in a written record.

The Rule's structure puts the burden on the licensee. The vendor does not need to ask in order for the disclosure duty to apply. The licensee must disclose proactively. In practice, many agencies do not disclose specifically because vendors do not know to ask.

The question that reveals the structure

A direct, written request is the most effective approach. Template language:

Hi [agent], before the sale closes out, I'd like to ensure all Rule 9.15 disclosures are on the record. For each of the following providers recommended or arranged by the agency during this sale, please confirm in writing:

1. The amount the provider invoiced the agency.
2. The amount the agency invoiced me.
3. Any referral fee or other benefit received by the agency, the licensee, or any associated party from the provider.
4. Any other benefit or advantage received in connection with this recommendation.

Providers to confirm: [building inspector name], [photographer name], [stager name if applicable], [any other agency-referred provider].

Please reply in writing by [date]. If no such benefits were received, please confirm that explicitly. This request is under Rules 9.14 and 9.15 of the Professional Conduct and Client Care Rules 2012.

The written request does several things at once. It creates a record. It shifts the burden to the agency to disclose specifically. It narrows the scope of plausible deniability. It converts a grey area into a defined exchange.

What the reply typically looks like

Three patterns of reply are common:

• Full disclosure. "We invoiced you $1,800 for the building inspection; we paid the inspector $1,500; we retained $300 as an administration fee." This is what Rule 9.15 contemplates. If the fee structure is reasonable, no further action is needed. If it is not, the vendor can request an invoice adjustment.
• Pass-through confirmation. "We invoiced you the exact amount the provider invoiced us. No benefit was retained." Consistent with Rule 9.15.
• Evasion or refusal. "Our pricing is commercial-in-confidence." "Our arrangements with suppliers are confidential." "This information is not typically disclosed." These responses are not compliant with Rule 9.15. Confidentiality is not a defence under the Rule.

An evasive or refusing reply is itself significant. The Rule's obligation is clear; a refusal to comply with a direct written request is evidence of a Rule 9.15 breach and can be cited in a subsequent REA complaint.

The better default: engage providers directly

The cleanest approach is to step outside the referral chain entirely. When the agency recommends an inspector, consider:

• Asking the agency for two or three inspector suggestions.
• Checking each against the LBP and NZIBI registers.
• Contacting your preferred inspector directly, engaging them, and paying them directly.

The same applies to photography, staging, and any other service where the agency has a referral relationship. Direct engagement removes the disclosure question entirely. The provider is accountable to you directly. There is no agency margin. The inspector's report is not filtered through the agency's relationship. The photographs are your photographs.

The agency may push back on direct engagement on the basis that "we have trusted providers" or "our integrated workflow is more efficient." Both are true statements; neither is a reason to accept an opaque fee structure. A trusted provider can still invoice you directly.

Scale of typical markups

Because disclosure is inconsistent, systematic data on NZ agency markups does not exist in the public domain. Industry-insider reporting and the occasional disclosed instance suggest markups typically fall in the range of 10% to 30% on the provider's invoice, with higher percentages on photography (where the markup is often embedded in marketing-budget line items) and lower percentages on commodity services. Some agencies pass through at cost; some do not. Some providers offer referring agencies volume discounts that they pass through; some do not.

For a vendor whose marketing budget is $8,000 and whose separate inspection and photography costs are $3,000, a conservative assumption of a 15% undisclosed markup across the package suggests $1,600 in non-transparent cost — the equivalent of several hundred dollars in commission. Disclosed, this is a legitimate business arrangement. Undisclosed, it is a Rule 9.15 breach and, depending on scale, potentially a Fair Trading Act issue.

When the reply confirms a markup

If the agency's reply confirms a retained margin on any provider, three responses are available:

• Accept it. If the disclosure is made and the margin is reasonable for the service coordination work the agency performs, that is a commercial arrangement the vendor can accept.
• Request an adjustment. "The disclosed margin was not agreed in advance. I'd like to amend the invoice to reflect the provider's invoice amount." Whether the agency agrees depends on the specific circumstances.
• Escalate. If the disclosure was not made until requested (i.e., the agency failed to proactively disclose under Rule 9.15), the vendor can file an REA complaint on the procedural breach regardless of whether the margin itself is accepted.

Where this guide sits in the section

Previous: The building inspection report: what NZS 4306 requires.

Related: Selective Approval Theatre.

Rules cited: PCCC Rules 2012 (Rules 9.14, 9.15), REA Act 2008, Fair Trading Act 1986.