In part one of this blog, we covered the first three legal issues that get Brokers and Realtors in hot water, as reported by the National Association of Realtors. Here are the rest of the top ten:
Legal issue #4: Antitrust violations
Definition: Antitrust laws look to curb unreasonable restraints on trade. In the real estate industry, that could include price fixing, boycotting listings by certain companies or Realtors, commission manipulation, etc.
Key statistic(s): In the majority of cases, antitrust in occurs when cooperating Realtors or brokers discuss their commissions or compensation, outside of their legal and fiduciary responsibilities to their clients.
More information: These laws are intended to prevent unreasonable restraints of trade. Examples of antitrust violations that impact you are price fixing and group boycotts. Competing brokers should never engage in discussions of their commission rates or the amount of compensation they offer cooperating brokers. You must also avoid conduct that could lead to allegations that you agreed not to do business with a certain competitor.
To limit liability: Educate your agents and sales associates what they can and can’t discuss when it comes to commission rates and compensation, and to whom.
Legal issue #5: Advertising that is false or misleading
Definition: All brokerage and Realtor advertising – whether on a billboard, in print, or online – must comply with that state’s licensing laws and regulations, as well as the Realtor Code of Ethics.
More information: Many Realtors forget to adhere to requirements in their ads like indicating the broker’s status as a licensee, as well as not making prohibited claims or promises.
To limit liability: The hot topic now is online advertising so make sure all internet marketing – including email campaigns, social media ads, etc. are approved by the broker or office manager. The National Association of Realtors has also developed effective guidelines for advertising that you should review with all sales associated.
Legal issue #6: Employment or independent contractor status for salespeople
Definition: The vast majority of real estate salespeople are independent contractors who receive 1099s, not W2’d and salaried employees, which could bring some sticky legal issues.
More information: Federal tax law changes in 1982 eased the way for brokers to employ their salespeople as independent contractors, but state tax and employment laws, as well as worker’s compensation and unemployment compensation regulations may not fall neatly in line. About 90 percent of real estate brokers use independent contractors as their sales force.
To limit liability: Carefully review federal, state, and employment requirements when it comes to independent contractor status, and consider hiring a consultant to draft a “playbook” for you to make sure you are in compliance.
Legal issue #7: Environmental issues
Definition: Conflicts arising from asbestos, lead-based paint, contaminated water, mold, and even pests and wood destroying organisms can quickly escalate into ugly lawsuits if brokers and Realtors aren’t careful.
More information: Realtors need to be in strict compliance with federal and state laws and real estate regulations when it comes to environmental issues. Specific disclosures, timelines and protocols exist for buyers and sellers in every real estate transaction.
To limit liability: Continue educating your Realtors and sales associates. Arm them with no only the correct real estate forms and disclosures, but additional pamphlets and resources from the Environmental Protection Agency. They should never offer their opinion, advise a client what to do when it comes to environmental issues, and always defer to the proper experts and contractors for information or help.
Legal issue #8: Violations of Real Estate Settlement Procedures Act (RESPA)
Definition: RESPA is in place to eliminate kickbacks and pay outs of referral fees between real estate salespeople and vendors, other Realtors, or homeowners.
More information: RESPA violations can be a big problem not only for Realtors who give kickbacks, but mortgage brokers, title companies, or any other vendor or contractor who pays for referrals or benefits from a compensatory arrangement without proper disclosure to clients.
To limit liability: Keep abreast of RESPA changes and updates, but also cross check with NAR, and always use the proper forms and documentation to disclose any affiliate relationships.
Legal issue #9: Unauthorized practice of law
Definition: Brokers and real estate salespeople are strictly prohibited from providing legal advice.
More information: Article 13 of the NAR Code of Ethics reads: “REALTORS® shall not engage in activities that constitute the unauthorized practice of law.” While that is clear-cut, the reality is that Realtors and brokers do have authorization to fill out and make changes to legally binding real estate contracts, but always with proper disclosure and never in lieu of professional legal advice.
To limit liability: Realtors are allowed to fill in the blanks on official legal contracts, but never to draft those contracts themselves. If legal issues arise or the client has questions about the law, always advise them to seek legal counsel – and put it in writing.
Legal issue #10: Not abiding by the Americans With Disabilities Act
Definition:
The Americans With Disabilities Act mandates that brokers are required to do what is “readily achievable with reasonable effort and expense” to serve clients with disabilities.
More information: To eliminate discrimination against clients with disabilities, the AWDA calls for a broker to follow certain protocols to help grant normal access to services.
That includes making sure that your office, which is a public accommodation, is equipped with ramps, curb breaks, and other considerations to allow a disabled person to access the building.
To limit liability: Your office is a public accommodation, so make sure your office is wheelchair accessible and equipped with other considerations for those with disabilities. Remember that the AWDA applies to your employees, too.