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NAR Approves Changes to Professional Standards Rules

By: Hank Lerner, Esq. on in

Several changes to the National Association of Realtors® Professional Standards rules were approved by the NAR board of directors on Friday, Nov. 13. This is a very quick overview of the changes. NAR has provided an in-depth review of the changes, including a detailed FAQ and additional supporting materials. Please review these materials before jumping to any conclusions (or commenting on this article).

The centerpiece of these changes is the addition of a new Standard of Practice 10-5, which says:

“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.”

(For the rest of this article, I’ll just refer to this generally as bigoted language or activity.)

Unlike most of the rest of the code, Standard of Practice 10-5 is not specifically limited to the context of real estate transactions. That is intentional.

This year has seen a dramatic increase in reports of Realtors® engaging in various sorts of bigoted activity – both within the context of real estate practice and outside of real estate. Standard of Practice 10-5 stands for the idea that any Realtor® who tells two Black men that they are in a “no n****s zone” or describes himself as “anti-LGBTQ” (only two of the dozens and dozens of reports NAR has received just this year) is likely not going to be able to provide “equal professional services” to members of those protected classes as required under Article 10, regardless of the context of that activity.

With that in mind, the second change from NAR is an amendment to Policy Statement 29 of the Code of Ethics and Arbitration Manual. That policy has historically said that Realtors® are only subject to disciplinary actions “with respect to real estate-related activities and transactions…” The newly approved changes, however, state that “A Realtor® shall be subject to disciplinary action under the Code of Ethics with respect to all of their activities.”

Though this seems incredibly broad, it really isn’t. In short, this only expands coverage to activities where the Code of Ethics itself doesn’t already limit enforcement to real estate activity. For example, Article 1 explicitly refers to activities “when representing a… client as an agent” and requires Realtors® to “treat all parties honestly.” Article 12 governs certain aspects of “real estate communications.” Article 16 covers interference in “exclusive representation or exclusive brokerage relationship agreements.” And so on. Policy Statement 29 doesn’t override or broaden that specific language. This change applies only to a few items in the Code that are not already limited to the real estate context, but primarily to Standard of Practice 10-5.

The third major change is to update the definition of a “public trust” ethics violation. The current definition says that a violation of the public trust is one that involves a finding of “willful discrimination” or “fraud resulting is substantial economic harm.” The new definition would apply more broadly to any ethics finding of discrimination or fraud, without those modifiers.

Existing procedures state that associations may forward any ethics violation to “any governmental agency” if they deem it to be warranted, but that they must refer to the state regulatory body if there has been a violation of the public trust related to real estate activities. Broadening this definition to all instances of discrimination or fraud would increase the number of referrals, at which point it is still up to the State Real Estate Commission to decide whether or not to pursue a licensure enforcement action (presuming complaints haven’t already been filed, which they usually are).

These proposals were derived through nine Professional Standards meetings (three committee, one forum and five advisory board), review by NAR legal counsel, countless presentations and discussions with various NAR constituencies and considerable debate over many months on the Hub. While NAR can’t claim that every possible question/concern/objection was discussed during that process, all of the most common were definitely raised and considered. Please review the NAR materials and FAQs for additional information.

These changes went into effect immediately upon passage, so they are in place today and apply to any relevant activities that occurred on or after Nov. 14, 2020. PAR will be providing training to volunteer members who may hear cases based on these complaints to ensure that they are well-versed on the application of the new rules, and will provide informational sessions upon request for local associations.


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Comments (2)

Comments

  • Andrew Wetzel   November 16, 2020 at 11:57 am

    Thanks Hank.

    Will appropriate changes be made to RELRA as well?

    The public seems unable to differentiate between members and non-members so this should be a uniform expectation to best protect the industry.

    Reply to Andrew Wetzel
    • Hank Lerner, Esq.   November 16, 2020 at 5:20 pm

      Section 604(a)(22) of RELRA already states that a violation of the PA Human Relations Act is a potential violation of license law. An Article 10 violation directly related to a real estate transaction is potentially within the scope of the PHRA and could be acted on by the state if an independent complaint is filed or if the association passes it on as a public trust violation. But in a number of instances the Code of Ethics goes above and beyond state law. For example, for about 10 years the Code of Ethics has protected sexual orientation and gender identity when state law does not (PAR has supported several bills that have not been passed).

      It could be difficult to extend some of this into the law, since the role of the government is different than that of a trade association. These new changes represent another area where the Code will impose stricter rules than the law, providing additional justification as to why Realtors say that they hold themselves to a higher standard than non-member licensees. While not disagreeing that many consumers (and some members) don’t know the difference between the association and the state, I can assure you that anyone who calls with a potential discrimination complaint is provided the full menu of potential avenues depending on the individual’s membership status and the will of the caller.

      Reply to Hank Lerner, Esq.

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