Realtor Code of ethics violations can result in negative publicity and place your license in a false light!
In case you haven’t heard, there is a new crackdown in ethics in the practice of real estate. A California real estate license allows you to do many things, such as property management, residential sales and leasing, commercial real estate, sale of business opportunities and even mineral, oil, and gas transactions. Yet now it is even more important than ever to understand your ethical obligations in regard to the practice of real estate, and to DEFEND YOUR GOOD REPUTATION when another broker, a member of the public, or any other entity challenges you and accuses you of violating the broker ethical rules set forth by NAR (National Association of Realtors). This blog will discuss the things you need to know to fight for your legal rights and to protect your real estate license.
What’s going on?
The California Association of Realtors (“C.A.R.”) effective August 1, 2014 will publish the names of members found to be in violation of the Realtor Code of Ethics. Here is what their website says:
“C.A.R. will be publishing the names – (and the other information listed below) – of members who are found in violation of the Code of Ethics. If a member is found in violation of the Code and the discipline is a reprimand, fine, suspension or expulsion – anything other than a letter of warning or stand-alone education – the following information will be published by C.A.R.:
(1) The name and photo of the member found in violation If the member’s name is similar to another member’s, their real estate license number and/or office address may also be included in the publication;
(2) A list of the Articles of the Code of Ethics that were violated and possibly the applicable standards of practice;
(3) A brief factual synopsis of the matter, with the names of other parties removed;
(4) The discipline imposed;
(5) The effective date and duration of discipline imposed;
(6) The hearing Panel’s rationale for the discipline imposed, if applicable;
If this sounds like a “mugshot” and a public flogging for code violations you are right. Whether or not you agree with this approach, (and many brokers I have talked with have found it to be excessive), you have to take it serious as you do not want to end up in a database, especially if you dispute the charges that are being made against you. I have seen plenty of ground, baseless, and frivolous ethical allegations being thrown around whenever it seemed to gain leverage in a real estate arbitration or a real estate litigation case. In other words, people, including other real estate brokers and salespersons will often file “ethics charges” whenever they perceive that it might provide them an advantage in a civl case or commission dispute.
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Is a publication made for any allegation of NAR Code of Ethics violations?
No. As mentioned on the CAR website:
“Publication is triggered only if the discipline is a reprimand, fine, suspension or expulsion – i.e. anything other than a letter of warning or stand-alone education.”
In other words, simply making allegations against you is NOT enough to trigger a publication. Before a publication can be made, there has to be an action taken, including the above types of disciplinary actions.
Will the name of the real estate firm be published?
It depends. Again, the C.A.R. website also notes the following:
“The name of the real estate firm will not be published. The name of the responsible broker will be published, only if the broker was also named and found in violation. This information will be published on the members-only section of car.org and local associations will be free to republish the information in their local members-only publications. Local associations will begin requiring respondents named in an ethics complaint to submit a photo at the time of filing a response to the complaint, or allow their picture to be taken before the hearing begins.”
Say cheese? Taking your picture for a “members only” database sounds a little spooky, especially when the allegations may be nothing but harassment, and worse, a case of defamation or the tort of false light. Yet, this is what is possible when you face a challenge to your ethics.
Why the crack down on ethics?
The NAR code of ethics has been around over 100 years. It’s not clear to my why the recent crackdown on ethics, other than to raise the civility level in the practice of real estate. raising professional standards can raise the level of respect for the real estate industry in general. This is important because in an age when many people (potential buyers and sellers) are relying more on the internet than they MIGHT be relying on licensed real estate professionals, it is important that the level of ethics be improved. I’m not sure I love the idea of blasting your photo like a criminal mugshot when you inadvertently get involved in a failure to respect an agency relationship for example, but this is what’s in store.
Why do COE violations need to be publicated with a photo?
This will allow local associations and CAR “members” to look up another Realtor and see if they have any violations in their background. I suppose if you look someone up and they have ethics violations, and you see their Mugshot, you might be careful how you deal with them, or perhaps you tell your Client about them, I’m not exactly sure how this plays out. What I do know, however, is it is important not to have your photo published in this manner in order to protect your online reputation. This may also (possibly, I am not sure) effect your broker E&O insurance rates, and could possibly be used against you in other ways.
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Summary of the major code of ethics violations
Some of the main types of code of ethics violations that can arise in the practice of the real estate business are as follows:
1. Agents failing to present all offers to the seller
2. Failure to disclose dual representation. See Article 1
3. Making verbal counter-offers (real estate documents should be in writing per Article 9)
4. Misrepresenting commissions in the MLS
5. Failure to disclose license status in advertisements, such as a FSBO ad (see Article 12 standard of practice 12-6)
6. Interfering with established broker relationships (failing to respect existing agency relationships). See Article 16.
7. Misrepresenting the availability of access to show or inspect a listed property (See Article 3, SOP 3-8)
8. Working in areas where the real estate licensee is not competent
9. Buyer’s agents giving their Clients keys to the property before the close of escrow (See Article 3 – standard of practice 3-9)
10. Failure to protect and promote the interests of the Client (See Article 1)
12. Use of false or misleading domain names.
Top 3 reasons to vigorously fight any allegation of unethical conduct that is made against you
Unfortunately, real estate is a “dog eat dog” business like just about every other business out there. Competitors and customers can both get bullish when the rubber hits the road, and ethics charges can get passed around like a whiskey bottle at a frat party. When that happens, you need to stand up for yourself, and your reputation and defend yourself. Failure to take a NAR code of ethics violation serious can result in:
1. Unwanted mugshots in databases accessible by other real estate professionals is great fuel for starting a “rumor mill” against you. Such information could be subject to “cut and paste” and used on other internet blogs which could create further issues and complications for the real estate licensee.
2. Ethics violations against a broker or salesperson could find its way into an email that your Client will see and which may make them wonder if they hired the right agent. After all, what do you think one agent would do to another agent if they are aware of a prior ethical violation?
3. These allegations could be used against you in a California Bureau of Real Estate (“BRE”) complaint, real estate arbitration, or in a civil lawsuit to paint the agent as an unethical person, a bad actor, and to improperly hold this against you as some for of “character evidence” in another case.
There are other reasons, or course (such as the possibility that you could be fined $15,000), but these are three good reasons to fight to protect your name when allegations of “unethical conduct” are made against you or your real estate business.
NAR Code of Ethics Resources
Contact a California real estate ethics and arbitration law firm
When your good name and reputation are on the line, it makes good sense to hire legal counsel to represent you. Our real estate lawyers can help protect your interests, whether you are facing a real estate complaint, investigation, property management audit, Code of Ethics complaints, arbitration, or litigation cases. We can be reached at (877) 276-5084 or fill out the contact form below to have a representative of our company get back to you, normally within the hour.
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