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Nguyen v. Scott: California Court Reviews Article 5 of NAR Code of Ethics

Note: NAR’s Code of Ethics and Standards of Practice were revised, renumbered and reformatted in 1995. The following cases have been organized according to the revised numbering of the Articles of the Code of Ethics. Where a summary of a case includes a reference to an Article of the Code of Ethics, both the original and revised numbering are noted. Only the current versions of the texts of Articles are used to introduce each Article in the outline below.

Article 5: REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.

Broker held a power of attorney for a creditor bank which was foreclosing on a property held in joint tenancy with the plaintiff. The broker knew that plaintiff sought partition of property, but nevertheless pursued a “secret plan” to purchase the property for himself. The California Court of Appeals held that broker breached his duty of honest and fair dealing with plaintiff as established by: (i) California Business and Professional Code for Real Estate Professionals; (ii) California Administrative Code; (iii) Article 12 (Rev. Article 5) of NAR’s Code of Ethics; and (iv) a reference book published by California Department of Real Estate.

Nguyen v. Scott, 253 Cal. Rptr. 800 (Cal. Ct. App. 1989).

Further: The Massachusetts Court of Appeals has also reviewed Article 5 in the case Dowd v. Iantosca.

Note: NAR’s Code of Ethics and Standards of Practice were revised, renumbered and reformatted in 1995. The following cases have been organized according to the revised numbering of the Articles of the Code of Ethics. Where a summary of a case includes a reference to an Article of the Code of Ethics, both the original and revised numbering are noted. Only the current versions of the texts of Articles are used to introduce each Article in the outline below.

Article 5: REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.

Broker made an offer on sellers’ property during the time period when he knew seller and a prospective buyer represented by one of broker’s agents were seriously negotiating for the same property. Broker’s offer, while ultimately the same amount as prospective buyer’s offer, was deliberately designed to appear better to the sellers. In finding that the broker had interfered with a “contractual and otherwise advantageous relationship, the Massachusetts Appeals Court relied on: (i) Restatement (Second) of Torts, Sections 767 and 768(1)(b); (ii) Articles 7 (Rev. Article 1) and 12 (Rev. Article 5) of NAR’s Code of Ethics (“to treat fairly all parties to the transaction” and not to “undertake to provide professional services concerning a property. . .where he has a present or contemplated interest unless such interest is disclosed to all affected parties.”)

Dowd v. Iantosca, 538 N.E.2d 33 (Mass. App. Ct. 1989).