Gifts, gratuities, and hospitality in business development practices - the perceptions of stakeholders within the alternative real estate lending market

Grazyna Wiejak-Roy and Alice Williams

ERES from European Real Estate Society (ERES)

Abstract: The prevalent use of gifts, gratuities, and hospitality in the alternative real estate lending markets as part of business development practices has been observed, with the nature, scale, and type of such offerings varying significantly. With no formal regulation of the market, and a sole reliance on the U.K. Bribery Act (2010) alongside a handful of industry bodies, it begs the question of whether such offers may lead to market inefficiencies and unfair treatment of borrowers in the industry, resulting from the principal-agent problem arising. There has been substantial research demonstrating the benefits of including gifts, gratuities, and hospitality offers within any business development strategy as such practices lead to an increased number of real sales for the offering business. The resources exploring the principal-agent problem demonstrate the risks of such a problem arising and its impact on entire markets. Research has gone as far as to link the principal-agent problem to the misbehaviour of mortgage brokers within the regulated mortgage industry, an issue that became evident in financial crash of 2007/08. Minimal literature exists on business development practices involving the offering, and accepting, of gifts, gratuities, and hospitality. In this research perceptions have been sought from stakeholders within the alternative real estate lending market to determine the use and acceptance of gifts, gratuities, and hospitality. It is concluded that whilst there continues to be a place for such practices within the market, expectations of reciprocation from the recipient should be avoided, as it is at this point there becomes a significant risk of the principal-agent problem arising.

Keywords: gifts; gratuities; Hospitality; real estate lending (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-ure
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