A Closer Look at Code of Ethics Hearings

ORLANDO, Fla. — Local Realtor® boards throughout Florida administer hearings concerning alleged violations of the National Association of Realtors® Code of Ethics. Here’s a practical overview of these hearings.

NAR adopted the Code in 1913. Since then, it has been refined to adapt alongside the industry many times. The Code contains 17 articles, which are broken down in 3 sections: Articles 1-9 contain duties owed to clients and customers, Articles 10-14 contain duties owed to the public and Articles 15-17 contain duties owed to other Realtors. Anyone can file an ethics complaint.

When it comes to rules, there is significant overlap between license law administered by the Florida Real Estate Commission (FREC) and the Code administered by local boards. Most violations of things like advertising, escrow rules or disclosing latent defects, will be a violation in either forum. However, some violations, like Article 16’s duty to avoid interfering with another Realtor’s exclusive relationship, only violates the Code. Another difference is the level of involvement. Florida Department of Business and Professional Regulations (DBPR) complaints, handled by FREC, are processed by the state, while Code of Ethics complaints require the complainant to participate throughout.

When a complaint is filed with a local board, the process follows a set path:

• The first step is for an ombudsman to determine if the issue could be handled informally, perhaps through communication and reconciliation.
• If the complaint cannot be handled easily, mediation could be the next step. Mediation will either be required or optional, depending on a local board’s rules.
• From there, it goes to grievance, where a panel decides if the allegations could be a violation (assuming all statements and evidence in the complaint are true).
• If not, grievance should dismiss the case.
• If so, then the case should be forwarded to a hearing panel.

In the hearing, the complainant and respondent can present evidence, including documents, personal accounts or witness statements, to argue whether a violation occurred. If the panel finds a violation occurred, the respondent may provide mitigating evidence, or background information that could lead to reduced discipline.

Once a hearing panel reaches a conclusion, the file goes to the local board’s board of directors. The board may ratify the decision or take action to correct any issues in the record.

NAR publishes plenty of public-facing material to help complainants and respondents evaluate their case, including the COE and standards of practice, the Code of Ethics and Arbitration Manual and case interpretations.

Real-world Code of Ethics examples

NAR’s case interpretations provide a brief story establishing the facts, the complainant’s and respondent’s arguments and the hearing panel’s conclusion. These aren’t actual cases but give excellent examples of how NAR believes hypothetical cases should be resolved. Here are a few short summaries of three case interpretations:

Case #1-18 Realtor not Responsible for Legal Advice

Client A sold a commercial property through Realtor B and learned after the sale that his total tax position would have been more favorable if he had disposed of the property through a trade. During the listing term, Client A had disclosed his total tax position and believed Realtor B’s failure to advise about a trade possibility was a violation of the Realtor’s duty to protect and promote the interest of a client under Article 1.

Realtor B defended by saying he had mentioned that sale of the property could result in unfavorable tax consequences and suggested that Client A consult an attorney, which Client A did not do.

The hearing panel concluded that this was not a violation of Article 1, since advising Client A to consult an attorney was an attempt to protect and promote the client’s interests. The panel also concluded that Realtor B wasn’t obligated to provide any advice beyond recommending legal counsel.

Case #2-7 Obligation to Determine Pertinent Facts

Realtor A, who was also a home builder, showed a recently constructed property to Buyer B, who asked about some construction beginning nearby. Realtor A responded, “I really don’t know, but I believe it’s the attractive new shopping center that has been planned for this area.”

After closing, Buyer B found out the construction was actually for a bottling plant and argued that, had he known, it would have caused him to look for a different property. Buyer B believed this was a violation of Article 2 for failing to disclose a pertinent fact.

Realtor A defended by saying he didn’t know what was being constructed and had heard about other developers planning to build a mall nearby. He was just venturing a guess, and did start his comment by saying “I really don’t know...”

The hearing panel found Realtor A in violation of Article 2. It reasoned that Buyer B was justified in relying on Realtor A’s statement, even though he started the conversation by saying he really didn’t know.

Case #16-18 Assumed Consent for Direct Contact

Realtor A had an exclusive listing agreement with a seller. Realtor A mentioned the listing to Realtor C and invited him to cooperate if Realtor C had a buyer. When Realtor C brought a contract offer, Realtor A invited him to be present when the offer was presented to the seller. The next day, Realtor C contacted the seller directly to encourage moving forward with the transaction. The contract was signed, and the deal closed.

Realtor A argued that contact with the seller was a violation of Article 16, since he never consented to Realtor C approaching the seller directly about the offer. Realtor C argued that, since he was invited to cooperate, and was later invited to the offer presentation, he assumed he also had consent to contact the seller directly.

The hearing panel concluded that this was a violation of Article 16, since consent can’t be assumed but must be express consent.

Joel Maxson is Associate General Counsel

Note: Information deemed accurate on date of publication

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