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Appendix 2: Merging an Independent MLS with an Association of REALTORS®

Appendix 2: Merging an Independent MLS with an Association of REALTORS®

Why should a multiple listing service which functions efficiently, yet is neither owned nor operated by an association of REALTORS®, seek association affiliation? This question is one which is posed repeatedly to the National Association and one for which there is no simplistic answer. However, among the considerations which have prompted such affiliation in the past are the following:

  1. The unification strengthens the position of the association in the community and contributes to harmony among REALTORS® since all are in the “same house” working together.
     
  2. Associations are most knowledgeable on a continuing basis as to policy of the National Association (Code of Ethics, official interpretations of bylaws, MLS Antitrust Compliance Policy). In this regard, an association MLS can have its governing documents reviewed by the National Association and can obtain policy guidance as to proposed amendments. Thus, they benefit from the National Association’s experience on a nationwide basis as to actions brought against multiple listing services, the interest of the Justice Department, provisions of consent decrees and, in general, evaluation on a continuing basis. This service is not provided to multiple listing services which are not owned and operated by associations of REALTORS®.

    The association MLS offers its REALTOR® participants the advantages of being able to clearly identify those persons to whom they offer compensation, knowing that they as REALTORS® and REALTOR-ASSOCIATE®s are all bound and directed by the Code of Ethics, knowing that they have agreed to arbitrate in the event of a dispute and have obligated themselves, as membership duties, to abide by the constitution and bylaws of the local association, the state and National Association. (Amended 11/96)
     
  3. The association MLS can deal with MLS rule violations, or if deemed desirable, may refer violations to the professional standards committee of the association and must refer all allegations of unethical conduct to the association’s professional standards committee and must refer all arbitration cases to an arbitration panel of the professional standards committee. An outside MLS must duplicate these facilities only at considerable additional cost, and in no event can enforce the Code of Ethics of the National Association to which it does not and cannot subscribe.
     
  4. If litigation arises against an MLS under association auspices, the protection of the errors and omissions insurance provided by the National Association is available. The association MLS also may have, under appropriate circumstances, access to the legal action fund of the National Association as a back-up to the errors and omissions insurance.
     
  5. The association MLS offers the economy of the same facilities and same staff as utilized by the association.
     
  6. In an association MLS there is no vested interest in any one or limited group of participants. The common interest without vested individual interest is an assurance to all who participate and contributes to harmony and best operation.
     
  7. The association MLS leaves no doubt that the service is a service and not merely a business enterprise. Policy of the National Association precludes an association-owned-and-operated MLS from functioning as an agent.

Once the numerous benefits of association affiliation are recognized and accepted, the next step is the merger itself. The National Association cannot specifically advise as to the procedural steps of combining a multiple listing service with an association without first reviewing the bylaws and constitution of the existing multiple listing service as well as the details of its financial operation. Review of such an outside multiple’s governing documents may be accomplished only after a specific request by the association president or executive officer when consideration is being given to a merger. Generally, the suggested procedure for merging an MLS operation into a service of an association of Realtors® is somewhat as follows:

  1. The association should appoint a committee to study MLS as a service of the association and work jointly with the committee from the multiple listing service.
  2. The multiple listing committee should appoint a group to study the methods of dissolving the independent operation and to work with the committee of the association. One way this can be done is to transfer the equipment which is owned by the multiple listing service and needed to operate the service to the association. In return, the association can agree to admit, without payment of initiation fee, all of the shareholders of the multiple listing service (provided they are REALTOR® principals) and the remaining assets of the service can be paid to the shareholders or transferred to the association on the same basis as the furniture and equipment. In any event, when all of the assets of the multiple listing service are either transferred to the shareholders or to the association, then the multiple listing service would cause itself to be dissolved.
  3. After due study, the recommendations of the joint committee should be made to the two respective groups.
  4. When the recommendations favor a merger, the board of directors of both groups should take appropriate action to secure membership approval for the merger.
  5. Where appropriate, the membership of the association of REALTORS® should adopt the association bylaw amendment suggested in the Handbook, authorizing the service and a method of supervision.
  6. A committee should be appointed to study rules and regulations for operating the service. The verbatim adoption of the model rules and regulations in the Handbook will bring automatic compliance with the policy of the National Association.
  7. The proposed rules and regulations should be referred to the board of directors of the association of REALTORS® for approval.
  8. When approved as described in the preceding paragraph, the service may begin operation as a service of the association. However, to obtain the coverage of the errors and omissions insurance program of the National Association with respect to the operation of the MLS, it is necessary that the National Association review the rules and regulations adopted by the service for compliance with the multiple listing policy of the National Association. It is important that this step be taken promptly following adoption of the MLS rules and regulations. (If desired by the association, the proposed rules and regulations may be forwarded to the National Association for review and critique prior to adoption by the board of directors of the local association.)
  9. An attorney should be retained to effect the dissolution of the outside service, and under counsel’s direction, the assets, tangible and intangible, should be dispersed in accordance with the merger agreement.

Inquiries regarding the merger procedure should be directed to Board Policy and Programs, NATIONAL ASSOCIATION OF REALTORS®. I