What to Do in the First Month

Learn Important Legal Issues

BY FINLEY MAXSON

Although your first priority as a new real estate salesperson is to market yourself and your business skills, work with buyers and sellers, and earn a commission, you also need to be mindful of all the legal issues that affect your work. By staying on top of all the laws that govern your daily real estate activities, you can help ensure that you will have a long and prosperous career with a minimum of legal problems.

To help you get started on your legal education, the NATIONAL ASSOCIATION OF REALTORS®’ Legal Affairs Department offers these overviews of important legislative and regulatory issues that affect real estate. Keep in mind that NAR primarily tracks federal legal issues, so this article does not offer information about all of the state laws that affect real estate practices. Therefore, you should contact your state REALTOR® association or a local real estate attorney to learn how best to comply with your state’s laws.

Following are the major issues covered:

• ADA. The Americans with Disabilities Act is a federal law that makes it unlawful to discriminate against people with disabilities. The law has five sections, or “titles,” which apply to employment, public services, public accommodations, services operated by private entities, and telecommunications. The U.S. Department of Justice published regulations to implement the statute. Title I, which contains provisions for accommodating the disabled in the workplace, affects real estate offices and association offices if they have the threshold number of 15 employees (although the definition of an employee is determined on a case-by-case basis, the federal statute does not apply to independent contractors). Title III, which requires accommodations so that the disabled can access public places, affects association offices, real estate offices, and commercial facilities. Click the link above to read and download the “Americans with Disabilities Act Compliance Kit” prepared by NAR.

• Antitrust. Antitrust laws are designed to ensure competition and prevent monopolies and agreements to restrain trade. The nature of real estate practice makes real estate professionals particularly susceptible to antitrust challenges. Practitioners vigorously compete to secure property listings to offer for sale, but they also regularly cooperate with one another, as subagents, buyers’ representatives, or “facilitators” to identify ready, willing, and able buyers for those listings. This dual tradition of competition and cooperation, which exists in few other professions, presents frequent opportunities for antitrust misconduct, whether intentional or inadvertent. In today’s business environment, brokers particularly must be conscious of and abide by the requirements of antitrust law. For more information, click the link above to read the article entitled “Antitrust and the Real Estate Brokerage.”

• Fair Housing. Fair housing laws are intended to eliminate discriminatory behavior from the housing market. There are both federal and state fair housing laws, and most of these laws apply equally to the sale and rental of property. The federal fair housing laws prohibit housing discrimination based on race, religion, national origin, sex, handicap, and familial status. The laws prohibit conduct such as the refusal to sell or rent housing for discriminatory reasons; steering, which is designed to influence a person's housing choice toward a certain neighborhood based on a discriminatory purpose; and blockbusting, which is an attempt to create sales by playing on discriminatory fears of a community that people of a certain group are moving into the area. To learn more about various fair housing issues, click the link above and select “Fair Housing” from the “Topic” dropdown menu.

• Lead-Based Paint. The federal Residential Lead-Based Paint Hazard Reduction Act of 1992 and the subsequent regulations promulgated by the U.S. Department of Housing and Urban Development and the U.S. Environmental Protection Agency generally apply to sale or lease transactions of residential property constructed before 1978. Sellers and lessors of housing to which the regulations apply must provide a federal pamphlet of information on the risks of lead paint and perform other duties, including disclosing all known lead-based paint on the property and providing all testing reports. Any real estate practitioner hired by a seller or lessor to market the property must ensure that the seller or lessor complies with the requirements of the regulations. Under the Act, a buyer also has the right to conduct lead-based paint testing on the property. Click the link above to read a complete summary of the disclosure obligations and their requirements.

• Megan's Law. Megan's Law requires convicted sex offenders to register with local authorities, which then make the offenders’ address publicly available. The law is named after Megan Kanka, a 7-year-old girl in New Jersey who was sexually assaulted and murdered by a neighbor with a history of sex offenses. In 1994, Congress enacted legislation authorizing federal law enforcement funding to states that had enacted sex offender registration laws meeting certain minimum requirements. Every state currently has a sex offender registration law but the laws vary in their terms. A real estate professional’s disclosure duty under these laws remains unclear in most jurisdictions, although some states do have specific exemptions for real estate professionals. To learn more about Megan's Law issues, click the link above and select “Megan’s Law” from the “Subtopic” dropdown menu.

• RESPA. The Real Estate Settlement Procedures Act was enacted by Congress in 1974. Its goal is to provide consumers with various protections in the homebuying processes and, ultimately, to reduce the cost of homeownership. RESPA focuses on services provided in connection with the settlement of a federally insured mortgage loan. It regulates “abusive” practices by outlawing unearned fees and kickbacks and requires that consumers be provided with information about the settlement process and full disclosure of associated fees. In addition to the federal law, several states have adopted their own versions of legislation addressing these issues, which often are more stringent than RESPA. To learn more about RESPA issues, click the link above and select “Real Estate Settlement Procedures Act” from the “Subtopic” dropdown menu.

• Telemarketing. Federal telemarketing, or do-not-call, rules prohibit a real estate professional from making cold-calls to a consumer who has a phone number registered on the National Do-Not-Call Registry. The rules do contain some exceptions, such as allowing real estate professionals to contact someone they have done business with in the past 18 months. The federal rules preempt state telemarketing laws where the state laws are less restrictive, but not state laws that are more restrictive. Therefore, it’s critical to check both state and federal rules before embarking upon a calling campaign. Click the link above to learn more about the federal telemarketing regulations.

Legal Resources

• Comprehensive Risk Management Guide. NAR sells “Don't Risk It! A Broker’s Guide to Risk Management”—a publication created by Legal Affairs to help educate and guide brokers through the many legal issues they face on a daily basis, including independent-contractor relationships, agency policies, and disclosure. The publication is in its second edition and is meant to serve as an educational tool for brokers.

• Legal Scan. The Legal Scan is available for free to all NAR members at REALTOR.org. An ongoing research project commissioned by NAR, the scan tracks the legal subject areas that impact NAR members, ranging from fair housing laws to commission disputes to property management. The project involves compiling all relevant judicial decisions, statutes, and other regulations in these subject areas, as well as surveys completed by attorneys, regulators, and other leaders in the real estate industry. These results are tabulated every two years and then compared with the prior scans.

• NAR Legal Affairs. The attorneys employed by NAR provide legal counsel to NAR leadership, committees, and staff, as well as state and local associations, on the programs and policies of the association. They defend or supervise litigation where NAR is a party and author amicus curiae briefs in cases of significance to the real estate industry. They also administer various risk management programs for REALTORS®.

• The attorneys’ extensive association experience makes them uniquely qualified to counsel on issues relating to association law, NAR policies, or other areas of the law where NAR attorneys have developed specialized knowledge. NAR attorneys are precluded from providing legal counsel to members or employees on issues relating to their individual business or personal needs due to legal and ethical considerations.
  

Finley Maxson is Associate Counsel in NAR's Legal Affairs Department. He is editor of The Letter of the Lawnewsletter and works on internal NAR legal matters.