Broker Solicitation Ban Ruled Unconstitutional

Pearson v. Edgar, No. 97-2667, U.S. Court of Appeals for the 7th Circuit, Aug. 7, 1998.

November 1, 1998

CHICAGO—A federal appeals court has shot down as unconstitutional an Illinois antisolicitation law. The Illinois Legislature had used the menace of blockbusting, or panic peddling, as the rationale for keeping the law.

If the decision stands, Illinois brokers can send marketing material to all homeowners, even those who notify them that they don’t want to be solicited.

The Illinois antisolicitation law applies a restriction on free speech for a business practice that cropped up in the 1960s and early 1970s but that rarely, if ever, occurs today, the court said. Blockbusting, or panic peddling, is a practice in which some real estate brokers, exploiting fears of change in the racial composition of the neighborhood and potential decline in property values, encourage owners to put their homes on the market.

The Illinois law, passed in the mid-1980s, allows homeowners to notify brokers that they don’t want to receive real estate solicitations. Brokers who distribute material to those owners can be fined and placed under court supervision. The law applies only in Illinois, but it sets a potential precedent for restricting the right of brokers in other states to solicit business.

Outdated problem

The appeals court agreed with an earlier district court opinion and shot down the antisolicitation law because the state failed to show that blockbusting is currently a problem, let alone one that warrants the substantial restriction on brokers’ free speech imposed by the statute.

“Blockbusting no longer occurs with any frequency in Illinois,” the court said. “The state did not show that the harms it recites are real and that its restriction on solicitations will in fact alleviate them to a material degree.”

The court also rejected the state's argument that the statute was a legitimate attempt to protect residential privacy. It’s not appropriate to separate real estate brokerages from other businesses that distribute potentially offensive solicitations, the court said. Other forms of commercial solicitations weren’t included in the ban.

The appeals court decision is a “strong statement that the anti-solicitation law is unconstitutional,” says Ralph Holmen, NAR’s associate general counsel.

Where blockbusting does occur, “there are plenty of ways to stop those practices,” Holmen says, “principally the Fair Housing Act.”

Attorneys for the state plan to seek further court action to keep the Illinois law alive. The case has already been to court in the 7th Circuit three times, and was sent to the appeals court after a review by the U.S. Supreme Court. “It’s not quite dead yet,” Holmen says.

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