The NAR Code of Ethics is NOT Illegal (Definitely)

iStock_000006938226XSmall copyDid you ever have a friend that you really like and respect who sometimes drives you crazy? Rob Hahn fills that slot for me.

I love talking to Rob, conjecturing about the future of the business and having those long late night Frat House beer infused conversations that range over the wide open spaces of “What if” and “If that then this”, but sometimes he draws conclusions and paints pictures that make me wish he wouldn’t draw or paint at all because he get people excited about things that they really needn’t be concerned about. His blog post entitled “The NAR Code of Ethics is Illegal (Probably)” is a prime example of that.

Rob explains that NARPM, a professional organization for property managers has entered into a consent decree with the FTC centered around that groups Code of Ethics. Now while I am not a member of the group, its nice that they aspire to have a code of ethics, but writing one of those is a difficult job – far more complex than it might at first seem.

In Rob’s blog post, he suggests that their COE is similar to NAR’s Code of Ethics, which is the result of either hasty reading  or poor analysis.

Rob quotes the official press release which says :

The FTC’s complaint against NARPM, which represents more than 4,000 real estate managers, brokers, and agents, alleges that NARPM and its members restrained competition in violation of the FTC Act through provisions in its code of ethics that restrict comparative advertising and solicitation of competitor’s clients. The provisions read, “The Property Manager shall not knowingly solicit competitor’s clients,” and “NARPM Professional Members shall refrain from criticizing other property managers or their business practices.”

The proposed consent order settling the FTC’s charges requires NARPM to stop restraining its members from soliciting property management work, and from making statements that are not false or deceptive about a competitor’s products, services, or business or commercial practices. NARPM also must implement an antitrust compliance program, among other things.

He then goes on to say : “As all REALTORS know (or should know, if they are members of NAR, and therefore subject to the Code of Ethics), those two provisions are exactly equivalent to the Code of Ethics Article 16 and similar to Article 15.”

And he couldn’t be more wrong – REALTORS should actually know that these two clauses are very different from the Articles that Rob quotes, and as a result avoid the very issues that the FTC censured NARPM for. 

Article 15 of the code actually says “REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices. (Amended 1/12)”.

Nothing there about criticizing other members at all – say what you will – have whatever opinions you wish- criticize anything you like – as long as you don’t say false or misleading things about that person. A far cry from the offending NARPM article.

Rob seems to have difficulty with the word “misleading” in the article (though the word “false” is the key here I think) and says ““Don’t work with Jones because she’s senile” is probably misleading. “Don’t work with Jones because she doesn’t have a college degree” is probably not misleading.” I think he’s wrong.

These are factual matters –  If you said that someone was senile, without their having been diagnosed as senile, you are being misleading – specifically because you don’t have the medical authority to make that claim. And if Jones doesn’t have a college degree, you aren’t being misleading. You might even say that in your opinion a real estate agent needs a college degree and you would not have violated the Code. Its not as difficult to determine as Rob indicates, and we have lots of professional standards panels that are trained to help determine the facts of such a case.

Article 16 that he refers to says “REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients. (Amended 1/04)”

Nothing here about soliciting clients – just about avoiding interference with two people’s contractual agreements. In fact, the issue of solicitation is clarified in Standard of Practice 16-3 which says in part. “Article 16 does not preclude REALTORS® from contacting the client of another broker for the purpose of offering to provide, or entering into a contract to provide, a different type of real estate service unrelated to the type of service currently being provided (e.g., property management as opposed to brokerage) or from offering the same type of service for property not subject to other brokers’ exclusive agreements. ”

The Code goes an extra step to explain that solicitation of consumers in areas where they are not already obligated by contract to another member is absolutely fine – again something far from NARPM’s COE, or the conclusions that Rob has jumped to without reviewing the Code. Rob’s examples of people soliciting business at Open houses or at existing listings happens now in slightly different forms when agents solicit future or different business from clients of other REALTORS, while avoiding interfering with their current contracts.

NAR’s COE is 101 years old. It first iteration wasn’t even adopted by NAR until they had worked on it for 5 years.  It is reviewed and modified in an ongoing manner, under the eyes of the Professional Standards Committee, the Interpretations and Procedures Advisory Board, the amazing staff at Law & Policy, and the governing body of NAR. Those same staff members have met with and spoken to the FTC and the DOJ more times than anyone cares to count, and is a model of thoughtful analysis of the issues surrounding a professional interactions with consumers, clients and other professionals.

Each Article and each Standard of Practice is discussed and reviewed in what seems like endless meetings before words are changed or positions adopted, and that thoughtfulness should not be brushed aside by blog posts comparing it with the product of some other organization without the history or effort that has been spent creating our current Code.

Rob says ” As far as I’m concerned, based on the facts of the NARPM case, NAR’s Code of Ethics will be changed. ” He’s wrong and his concerns have no basis – and I wish that he would become more familiar with the Code and the processes surrounding it before engaging in headline hyperbole – he’s far better than that 🙂

Be Sociable, Share!