Part Fourteen — State Association Professional Standards Committee
Part Fourteen — State Association Professional Standards Committee
Authority and Requirement: The obligation of the State Association concerning the Code of Ethics of the National Association is established in Article IV, Code of Ethics and Member Board Business Practices, Sections 1 and 2, Bylaws, National Association:
Section 1. Each Member Board shall adopt the Code of Ethics of the National Association as a part of its governing regulations, for violation of which disciplinary action may be taken.*
Adoption of the Code of Ethics includes responsibility for providing applicant/new member Code of Ethics orientation and ongoing member ethics training that satisfies the learning objectives and minimum criteria established by the National Association from time to time.
Section 2. Any Member Board which shall neglect or refuse to maintain and enforce the Code of Ethics with respect to the business activities of its members may, after due notice and opportunity for hearing, be expelled by the Board of Directors from membership in the National Association. Enforcement of the Code of Ethics also requires Member Boards to share with the state real estate licensing authority final ethics decisions holding REALTORS® in violation of the Code of Ethics in instances where there is reason to believe the public trust may have been violated. The “public trust,” as used in this context, refers to demonstrated misappropriation of client or customer funds or property, willful discrimination, or fraud resulting in substantial economic harm. Enforcement of the Code of Ethics also requires Member Boards to provide mediation and arbitration services to members and their clients so that the dispute resolution requirements of Article 17 of the Code of Ethics can be met. (Revised 01/02)
Enforcement of the Code of Ethics also includes responsibility for ensuring that persons primarily responsible for administration of enforcement procedures have successfully completed training that meets the learning objectives and minimum criteria established by the National Association from time to time.
Enforcement of the Code of Ethics also prohibits Member Boards from knowingly granting REALTOR® or REALTOR-ASSOCIATE® membership to any applicant who has an unfulfilled sanction pending which was imposed by another Board or Association of REALTORS® for violation of the Code of Ethics.
*The separation of arbitration proceedings from proceedings under the Code of Ethics should not be construed as precluding consideration by the Hearing Panel of all factors, including the propriety of the conduct of the parties, relevant to the dispute which is the subject of the arbitration.
Jurisdiction of State Association: (if stated in State Association bylaws; also refer to provisions relating to professional standards in the Suggested Model Bylaws for a State Association recommended by the National Association):
(1) A local Board, prior to referring an ethics complaint or arbitration request for review to the State Association, should exhaust all efforts to impanel an impartial panel to conduct either the original hearing or the appeal or procedural review. These efforts may include the appointment of knowledgeable members of the Board on an ad hoc basis to serve on either a Hearing Panel or on behalf of the Board of Directors. If, because of notoriety, etc., the Board cannot impanel an impartial tribunal, the Board may refer the matter to the State Association, and the State Association may delegate to another Board or a regional enforcement facility, the authority to hear the case on behalf of the State Association. No Board or regional enforcement facility, however, may be required to accept this delegation of authority. If no other entity is amenable to conducting the review, the State Association shall be responsible for conducting the hearing. State Associations may, at their discretion, require that the President or Association Executive of the Board referring an ethics complaint or arbitration request certify that all reasonable efforts to impanel an impartial panel had been made, and may further require that those efforts be documented. (Amended 11/03)
(2) Allegations of unethical conduct and contractual disputes (and specific non-contractual disputes as defined in Standard of Practice 17-4) between REALTORS® and between REALTORS® and their customers or clients may be submitted to an ethics or arbitration panel at the State Association level under the following circumstances: (Amended 11/96)
(a) Allegations of unethical conduct made against a REALTOR® or REALTOR-ASSOCIATE® who is directly a member of the State Association and not a member of any local Board. (Amended 11/95)
(b) Allegations of unethical conduct made against a REALTOR® or REALTOR-ASSOCIATE® in the instance in which the local Board, because of size or other valid reason, determines that it cannot provide a due process hearing of the matter and petitions the State Association to conduct a hearing. (Amended 11/95)
(c) Contractual disputes (and specific non-contractual disputes as defined in Standard of Practice 17-4) between REALTORS® who are not members of the same Board where the matter has been referred to the State Association by both local Boards. (Amended 11/96)
(d) Contractual disputes (and specific non-contractual disputes as defined in Standard of Practice 17-4) between REALTORS® who are directly members of the State Association and are not members of any Board.* (Amended 11/96)
(e) Contractual disputes (and specific non-contractual disputes as defined in Standard of Practice 17-4) between a REALTOR® who does not hold membership in any Board, but is directly a member of the State Association, and a REALTOR® who is a member of a Board.** (Amended 11/96)
(f) Contractual disputes (and specific non-contractual disputes as defined in Standard of Practice 17-4) between REALTOR® Members of the same Board where the Board with good and sufficient reason is unable to arbitrate the dispute. (This provision is not designed to relieve the local Board of its primary responsibility to resolve differences arising between members of the same Board. The section recognizes that in some Boards with limited membership usual arbitration procedures may be impossible.) (Amended 11/96)
(g) Contractual disputes between a customer or a client and a REALTOR® where the Board with good and sufficient reason is unable to arbitrate the dispute or the REALTOR® is a direct member of the State Association. (Adopted 11/95)
Ethics and Arbitration Proceedings: Professional standards hearings and the organization and procedures incidental thereto shall be governed by the Code of Ethics and Arbitration Manual of the _____________________ (state) Association of REALTORS®, as from time to time amended, which by this reference is made a part of these bylaws.
It is recommended to State Associations that they adapt and adopt the Code of Ethics and Arbitration Manual of the NATIONAL ASSOCIATION OF REALTORS® to conform to the provisions of applicable state law. It is further recommended that the State Association expand the provisions of the Code of Ethics and Arbitration Manual as adopted to include detailed procedures for handling interboard arbitration of business disputes, as defined by Article 17 of the Code of Ethics, between REALTORS® of different Boards within the state. This fulfills the obligation of the State Association described in the preceding paragraphs and as established by Articles 14 and 17 of the Code of Ethics. If state law does not recognize or restricts arbitration within the state, the State Association is requested to so advise the National Association as a matter of information and record, and to comply with applicable state law. It is intended in all instances that State Associations and local Boards comply with applicable state law and that they do not act in contravention of law.
*The State Association is a “Member Board” of the National Association by definition set forth in Article III, Section 1(B) and Section 4, Constitution, NATIONAL ASSOCIATION OF REALTORS®.
**Reference is made to members of the State Association who are outside the jurisdiction of and are not members of any local Board within the state.
In adapting the Code of Ethics and Arbitration Manual of the National Association to include procedures for handling interboard arbitration, the following should receive special attention:
(1) Geographic distribution of professional standards panel members: Inasmuch as disputes may arise between Board Members from different Boards located distant from each other, it is desirable to establish members from the Professional Standards Committee in all areas of the state. When disputes arise requiring interboard arbitration, Hearing Panel members may be selected from the area where the hearing will take place to avoid unnecessary travel time. Further, it is desirable to include representative members from all districts or regions, or perhaps from each Board of the state.
(2) Further extension of available Professional Standards Committee members: It may be desired that the state will provide in its Code of Ethics and Arbitration Manual that members of the State Association Professional Standards Committee be empowered, upon direction from the President of the State Association, to appoint additional members of the committee from a given district or region of the state to have all the powers of regular members of the Professional Standards Committee and to conduct a hearing as required in that particular district or region of the state. (Alternate method of appointment may be preferred by a State Association to accomplish the statewide facility on a workable basis.)
(3) Duties of the committee: Duties of the Professional Standards Committee are set forth in the “Suggested Model Bylaws, State Association of REALTORS®,” as recommended by the National Association, and in this Code of Ethics and Arbitration Manual. However, the State Association should exercise care to adapt the provisions contained in this Manual to be applicable to the special and particular responsibilities of the State Association.
(4) Complaints of alleged unethical conduct or requests for arbitration: The Code of Ethics and Arbitration Manual of the State Association should clearly delineate the specific circumstances under which complaints of alleged unethical conduct or requests for arbitration may be properly directed to the State Association, and to describe the method by which such complaints or requests may be filed.
(5) Method of determining propriety of a complaint of alleged unethical conduct or request for arbitration: It is suggested that the State Association have a standing Grievance Committee, which shall be the committee to examine a complaint of alleged unethical conduct or request for arbitration to determine if it is properly presented by a Member Board or Board Member and has validity and substance to warrant a hearing before the State Association’s professional standards facilities. This Grievance Committee should have sufficient members throughout the state to enable the Committee Chairperson to appoint one or more members to evaluate the complaint or request and to make such preliminary review as required to assist in the evaluation. If deemed appropriate to arrange a hearing before a Hearing Panel of the Professional Standards Committee, the matter will be referred by the Chairperson of the Grievance Committee to the Executive Vice President of the State Association with request to arrange the necessary hearing by having the appropriate officer of the State Association make necessary appointment of panel members, etc., to accomplish the hearing. The Grievance Committee’s work is not that of a Hearing Panel of the Professional Standards Committee, but has the special function of determining the propriety of the complaint or request and the propriety of conducting a hearing. It is similar in function to the “grand jury” in the American judicial system. This committee is authorized in the Code of Ethics and Arbitration Manual, if adopted and adapted by the State Association.
(6) Expenses of hearings conducted by State Association: The conduct of hearings by the State Association can be less convenient than a local Board hearing. It involves distance, time, and costs which are significantly greater. Therefore, the provisions of the Code of Ethics and Arbitration Manual, as adapted, should specify to the extent possible the appropriate allocation of costs of any hearing conducted by the State Association. Notification of the allocation of such costs should be made in advance of the hearing, or at least the method by which such determination shall be made should be understood and agreed in advance of the hearing. This will avoid misunderstanding and further dispute between the parties, local Boards, and the State Association. For example, the State Association’s Code of Ethics and Arbitration Manual should state whether the deposits (not to exceed $500) made by each party in requesting arbitration shall be retained by the State Association and go toward the cost of arbitration, or whether only the deposit of the nonprevailing party shall be retained, etc. Further, it should be clearly stated if the award shall include any of the costs incurred by the prevailing party. It should be clearly set forth if the State Association will bear all or part of the costs involved, or whether the costs are to be borne entirely by the parties. If partial costs are involved, the procedure should delineate which costs are to be borne by the parties and which, if any, by the State Association. However, under no circumstances should a party to an ethics proceeding be responsible for another party’s costs or the State Association’s costs. A party that appeals an ethics determination may be charged an appeal deposit (not to exceed $500). If the Hearing Panel’s decision is overturned, the deposit shall be returned to the appellant; if the decision is adopted, the money shall pass into the general treasury of the Association; if the decision is modified, the appeal tribunal shall determine the disposition of the deposit. (Amended 11/95)
(7) Composition of Hearing Panels and appellate or review panels: State Associations have certain latitude in establishing the procedures for appointing Hearing Panels for ethics and arbitration hearings and for determining the appropriate composition of appeal panels (ethics) and procedural review panels (arbitration). The State Association’s Board of Directors need not be involved in the appeal or review process. For example, a State Association could adopt procedures whereby Hearing Panels would be selected from the Professional Standards Committee, and any subsequent appeal or request for review would be considered by those members of the Professional Standards Committee who did not take part in the initial hearing. Alternatively, the State Association’s Executive Committee or a group of Directors selected by the State Association President could serve as the appeal or procedural review panel. Any procedure established should be made an integral part of the State Association’s written professional standards procedures.
The procedures to be followed when no appeal is filed or after any appeal has been determined should also be made an integral part of the State Association’s written procedures. Final decisions may be ratified by the Board of Directors of the State Association; by a group of Directors selected by the state President; or by the State Association’s Executive Committee. (Adopted 11/96)
(8) Refusals to arbitrate: In the event a member is alleged to have improperly refused to submit a dispute to arbitration (or to mediation if the respondent’s Board requires REALTORS® [principals] to mediate otherwise arbitrable disputes pursuant to Article 17),* the allegation shall be brought before (choose one: the Board of Directors of the State Association or five (5) Directors of the State Association or the State Association’s Executive Committee or a Tribunal of five (5) members selected from the State’s Professional Standards Committee to be appointed by the President and chosen from the individuals who did not serve on the original arbitration Hearing Panel, etc.). The procedures for notices, time of notices, and hearing prescribed for matters before a Hearing Panel shall apply. The sole question of fact to decide is whether the party has refused to submit an arbitrable matter to arbitration (or to mediation if required). Upon determination that the member has refused to arbitrate or to mediate a properly arbitrable matter, the (specify body— name of tribunal) may direct implementation of appropriate sanction, including suspension or expulsion of the member from the local Board of REALTORS®. The decision of the (specify body— name of tribunal) shall be final and binding and is not subject to further review by the State Association or any Board. (Adopted 11/11)
*Requiring REALTORS® (principals) to mediate otherwise arbitrable disputes requires establishment of and affirmative obligation in a Board’s governing documents. Enabling bylaw provisions can be found at REALTOR.org (see Model Bylaws)
Final note: The preceding guidelines do not purport to be detailed provisions for inserting into State Association professional standards procedures as adopted, but are intended to direct certain areas of consideration to the State Association for careful review in its adoption of professional standards procedures, particularly with respect to interboard arbitration conducted by the State Association.
Duty to arbitrate before State Association (Part Ten, Section 46, Code of Ethics and Arbitration Manual, National Association of REALTORS®): By becoming and/or remaining a member of this Board (i.e., each local Board), every member binds himself or herself and agrees to submit to arbitration by the arbitration facilities of the _____________________ (state) Association of REALTORS® any dispute with a member of any other local Board of the _________________________ (state) Association of REALTORS®, provided:
(1) It is a dispute as defined and for which arbitration is required by Article 17 of the Code of Ethics, and
(2) The __________________________ (state) Association of REALTORS® has established facilities for such arbitration.*
In the absence of established procedures and facilities by the __________________________ (state) Association of REALTORS® for interboard arbitration, disputes requiring arbitration as defined in Article 17 of the Code of Ethics shall be submitted and conducted under the procedure established in Part Eleven of this Manual, subject to such modification as may be required by applicable state law.
This method described in Part Eleven of this Manual may also be utilized for the conduct of arbitration between Board Members of different Boards of different states, subject to the parties’ voluntary agreement in advance to accept the place, date, and time established for a hearing by the arbitration panel chosen in accordance with prescribed procedures, and to pay all costs of such arbitration as may be directed by the panel, and further subject to applicable state law of the respective states regarding binding arbitration.**
*The State Association, as a Member Board of the National Association, has the obligation to establish arbitration procedures and facilities consistent with applicable state law, as required by the Bylaws, National Association, Article IV, and by Article 17, Code of Ethics, National Association, for individual members of the State Association.
**Interstate arbitration is subject to many problems of administration and logistics and can be accomplished only if both parties agree voluntarily to such arbitration and agree to pay the required costs. Further, the applicable law of the state in which the arbitration will be held should be carefully considered prior to the arbitration, for this will relate to any necessary judicial enforcement if the nonprevailing party should refuse to pay the award.