RISK MANAGEMENT

Risk Management NAR Updates Code of Ethics for 2022

Association embraces remote arbitrations, puts counteroffer assurances in writing, axes free services, and clarifies hate speech

In November of 2021 the National Association of Realtors® (NAR) Professional Standards Committee met and approved a few updates to the Code of Ethics. There were some minor but noteworthy changes that are in full effect this year.

Code of Ethics and arbitration hearings can now be held remotely

Once again Minnesota led the nation with these changes at the onset of the pandemic in 2020. NAR used much of Minnesota Realtors’® (MNR) language and documents to codify the process for the United States. Although Realtors® can still proceed with in person hearings, there is now a procedure for remote hearings and hybrid hearings when the need arises.

SOP 1-8 amended to include counter offers

Previously, Standard of Practice (SOP) 1-7 and SOP 1-8 were amended so that when a buyer’s agent asked a listing broker—in writing—if their offer was presented to the seller clients, the listing broker had to provide written assurance that the offer had been delivered. The addition to SOP 1-8 now also provides written assurance that counteroffers are presented back to potential buyers. This was determined to be more of a clarifying measure.

Realtors®, acting as agents or brokers of buyers/tenants, shall submit to buyers/ tenants all offers and counteroffers until acceptance but have no obligation to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing. Upon the written request of the Listing broker who submits a counteroffer to the buyers/tenant’s broker, the buyers/tenant’s broker shall provide, as soon as practical, a written affirmation to the listing broker stating that the counteroffer has been submitted to the buyers/tenants, or a written notification that the buyers/tenants has waived the obligation to have the counteroffer presented. Realtors®, acting as agents or brokers of buyers/ tenants, shall recommend that buyers/tenants obtain the advice of legal counsel if there is a question as to whether a preexisting contract has been terminated. (Adopted 1/93, Amended 1/99)

Realtors® must not promote services as “free” or “no cost”

SOP 12-1 was amended removing all qualifying language about offering services for “free” or at no cost to the buyer.

Realtors® must not represent that their services as an agent or representative to a buyer or seller in a real estate transaction are free or available at no cost to their clients. This clarification is intended to end any public confusion regarding how Realtors® are paid. Prohibition of hate speech clarified by new case interpretations

Lastly, there were two case interpretations related to SOP 10-5 and the use of hate speech. Case Interpretations formally clarify issues likely to be addressed by an Article of the Code of Ethics and help Hearing Panels consider how to look at such situations. Standard of Practice 10-5:Realtors® must not use harassing speech, hate speech, epithets, or slurs based on race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.

Case Interpretation 10-10: Ethics complaint about Realtor’s® off-the-clock comments on same-sex relationships is dismissed. While attending a Bible-study class, a Realtor® made the following comment about certain passages being analyzed: “Some have said these verses clearly prohibit and condemn same-sex relationships.” After overhearing this, another student filed an ethics complaint highlighting SOP 10-5 under Article 10. However, the statement was not found to violate Article 10 because it was not intended to convey a discriminatory opinion and did not use hate speech or slurs. Case Interpretation 10-11: Confederate flag in property photos leads to ethics charges against listing broker. A listing broker hired a photographer to take pictures of a property, and then uploaded the images to the MLS. One of the photos prominently featured a Confederate flag that had been displayed by the homeowner. Subsequently, the photo was noticed by a Realtor® researching properties for her buyer client. In the complaint she filed against the listing agent, the Realtor® said the flag was a symbol of hate that strongly signaled her client would not be welcome at a showing. Looking into both SOP 10-3 and SOP 10-5 the hearing panel determined that the listing agent violated Article 10 of the Code of Ethics. Even though the flag belonged to the property owner, and the listing agent did not take the pictures himself, he still had authority over vetting the images and ultimately placed them on the MLS. By doing so, the panel concluded, he had allowed the display of a symbol of hate that conveyed an illegal preference and created a discriminatory effect.

What’s Hot on the Hotline

Untangling Representation Conflicts

Sometimes it is difficult for even the most experienced brokers and Realtors® to understand the complexities and representation agreements and the laws that shape them. In this issue, we look at some common questions that our attorneys field on MNR’s Legal Hotline.

Can a licensee serve as a facilitator for one party while also representing the other party?

No. Minnesota statutes prohibit a licensee from acting as both a facilitator and an agent in the same transaction. For example, Bob Clemens, a facilitator-broker* working with a buyer, shows a property he has listed as a seller’s broker. In this situation, Bob must act as the seller’s broker. If, on the other hand, Bob is working with a seller as a facilitator and agrees to show a property to a buyer he is representing as a buyer’s broker, then Bob must act as the buyer’s broker. *The statutes also apply to salespeople in the same situation.

Can an agent continue to represent a client who was obtained under Broker A if they switch to Broker B during the transaction?

No. When a client enters into a representation contract or facilitator services agreement, that contract is with the brokerage and remains with the brokerage unless the parties agree otherwise in writing. The salesperson is an agent of the broker and can only conduct business on behalf of the broker to whom they are currently licensed. Therefore, if the salesperson moves to Broker B, they will no longer represent the client and cannot interfere with Broker A’s exclusive client relationship.

As a salesperson, can I hire a licensed salesperson who has their license with another broker to work as my assistant in my transactions at my brokerage?

No. Minnesota licensing statutes state that a salesperson shall only conduct business under the licensed name of and on behalf of the broker to whom the salesperson is licensed. Therefore, a salesperson cannot conduct any real estate related activity for any other broker.