Watch Your Mouth

Don't disparage others when you recruit.

June 1, 2007

Q: A REALTOR® in my community actively recruits real estate licensees from other offices by e-mailing sales associates insulting comments about their broker-owners. Are his aggressive actions a violation of the NATIONAL ASSOCIATION OF REALTORS® Code of Ethics?

A:The recruiting activities of brokerages trying to attract licensees from other companies aren’t specifically addressed in the Code of Ethics. However, the Code requires all REALTORS® to be truthful in the comments they make about real estate professionals. It provides that “REALTORS® shall not knowingly or recklessly make false or misleading statements about competitors, their businesses, or their business practices.”

If insulting comments made by the broker aren’t true and the broker making them knows—or reasonably should know—they’re not true, his actions violate Article 15. However, if the comments are less than flattering, or even negative, but still true, there’s no violation of Article 15.

Let’s say Broker A and Broker B are competing to hire a top salesperson. In the last year, Broker A has sold 200 homes and Broker B has sold 40 homes. If during a conversation with that salesperson, Broker A said, “According to the MLS, I sold five times as many homes last year as my competitor, Broker B,” he would be stating a fact. Although Broker A’s statement about Broker B may be disparaging, it’s still a truthful statement, which doesn’t violate Article 15 or any other Article of the Code.

On the other hand, if Broker A tried to influence the top salesperson’s decision by saying that Broker B was a lousy manager and cheated his salespeople out of their commissions, he would be violating the Code (unless, of course, those statements about Broker B could be proved to be true).

Q:I recently represented a buyer in the purchase of a home that was in my MLS. After the contracts and counters were signed, the sellers informed their agent that they’d changed their minds. The transaction didn’t close. My broker says suing the other broker to collect the cooperative compensation that had been offered through the MLS would be too expensive, but I feel that I did the deal and should be paid. What rights do I have as an agent to make the sellers’ broker pay the compensation offered through the MLS without my broker’s backing?

A:Article 17 of the Code of Ethics covers arbitration of monetary disputes between REALTORS®. Specifically Article 17 says, “In the event of contractual disputes or specific noncontractual disputes as defined in Standard of Practice 17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTORS® shall submit the dispute to arbitration in accordance with the regulations of their board or boards rather than litigate the matter.” The bad news for you is that because no closing occurred, this dispute wouldn’t be eligible for arbitration.

The Arbitration Guidelines (Appendix II to Part 10) of the Code of Ethics and Arbitration Manual establish that a closed transaction must exist for a dispute between REALTORS® to be arbitrated. An arbitration panel determines what “caused” the successful transaction to come about in order to determine just compensation. A “successful transaction” is defined as “a sale that closes or a lease that’s executed.”

Even if your dispute did qualify, a REALTOR®-principal in your company would have to request arbitration under Article 17. As a sales associate or nonprincipal broker, you couldn’t invoke arbitration without your REALTOR®-principal joining the request. Because rights to cooperative compensation in situations such as the one you describe flow to your broker and the company and not to you (a sales associate) directly, any litigation option would also be your broker’s choice.

Bruce Aydt

Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.