Introduction to the Code of Ethics & Arbitration Manual

The Code of Ethics is designed to establish a public and professional consensus against which the practice and conduct of REALTORS® and REALTOR-ASSOCIATE®s may be judged. REALTORS® and REALTOR-ASSOCIATE®s in joining a Board signify their intention to abide by the Code and thereby enhance the public and professional image of themselves and all other REALTORS®. Adherence to the Code is the first great bond between REALTORS® and REALTOR-ASSOCIATE®s throughout the country, and is an obligation voluntarily accepted by them to ensure high standards of professional conduct to serve the interests of their clients and customers.

Each Board is responsible for enforcing the Code of Ethics pursuant to the Bylaws of the National Association. This duty must be discharged conscientiously and responsibly. Conscientious enforcement is essential if REALTORS® and REALTOR-ASSOCIATE®s are to be recognized as professionals subscribing to standards of business and ethical conduct higher than those required by law. This duty must be discharged responsibly because of the importance to REALTORS® and REALTOR-ASSOCIATE®s of their reputation and the esteem of their peers. (Amended 4/96)

Membership in a Board of REALTORS® has been recognized by the courts as a valuable property right. Therefore, any action by a Board limiting or denying the rights and privileges of a member must be justified, not only substantively but also procedurally. It is for this reason that failure to accord due process to a REALTOR® accused of a violation of the Code of Ethics can result in the reversal of the Board's decision by the civil courts and can expose the Board and its officers and members to liability for monetary damages and other penalties. Due process is not a difficult concept, but is an essential one. Due process means nothing more or less than the right to a full and fair hearing before an impartial tribunal with a full and complete knowledge of the charges made and with adequate opportunity to prepare a defense.

While the concept of due process is not difficult, its application to specific situations involving enforcement of the Code of Ethics can be troublesome. Therefore, before taking any disciplinary action which may lead to diminution of a member's rights or privileges, it is strongly recommended that the Board's attorney be consulted. Counsel will bring to the proceedings an informed and objective view of the controversy. Moreover, counsel can assure that the due process provided satisfies the requirements of local law. Procedures outlined in the Code of Ethics and Arbitration Manual will satisfy most requirements of due process, but the individual differences in the laws of each state will require interpretation and possible supplementation of local counsel.

In exercising its responsibility for the enforcement of the Code of Ethics, it is particularly important for the Board to distinguish between controversies which are properly the subject of arbitration and controversies involving the Code of Ethics. The Code of Ethics must not be used as a club or lever to settle business disputes between REALTORS®. For this reason, in complaints involving both charges of unethical conduct and request for arbitration, the dual complaint must be severed and arbitration heard prior to hearing any ethics charges.

A violation of the Code of Ethics involves an offense against the Board and its members generally, as distinguished from an arbitration hearing which involves a dispute among two or more members individually, arising from some common transaction involving the rendering of real estate services.* For this reason, it is never appropriate for a Board, in an ethics proceeding, to award money damages to another REALTOR®.

(*Under certain prescribed conditions, arbitration may be provided between a member and a nonmember of the Board, as, for example, between a REALTOR® and a client of the REALTOR®.)

An ethics proceeding has two essential purposes: education and vindication. It is educational in that it raises the consciousness of members to the meaning and significance of the Code. Many ethics violations occur inadvertently or through ignorance, and the hearing proceeding serves as an effective educational tool.

In filing a charge of an alleged violation of the Code of Ethics by a REALTOR®, the charge shall read as an alleged violation of one or more Articles of the Code. A Standard of Practice may be cited only in support of the charge. The Preamble is aspirational. Articles 1 through 17 establish specific obligations for which REALTORS® may be disciplined.

The Board has wide latitude in the sanctions which may be applied for violations of the Code of Ethics. It must, however, act responsibly in the application of these sanctions, attempting always to make the punishment commensurate with the offense. Recommendations of Ethics Hearing Panels may range from a mild Letter of Warning to termination of membership as follows in order of severity, provided that such actions are specifically authorized in the Professional Standards procedures of the Board's bylaws:

1. Letter of Warning with copy to be placed in member's file;
2. Letter of Reprimand with copy to be placed in member's file;
3. Requirement that member attend the ethics portion of the Board Indoctrination Course or other appropriate course or seminar specified by the Hearing Panel which the respondent could reasonably attend, taking into consideration cost, location, and duration;
4. ”Appropriate and reasonable fine not to exceed $15,000;(Amended 5/13)
5. Member placed on probation for a stated period of time not less than thirty (30) days nor more than one (1) year, with automatic reinstatement of membership in good standing at the end of the specified period of suspension. The thirty (30) day minimum and one (1) year maximum do not apply where suspension is imposed for a remediable violation of a membership duty (e.g., failure to pay dues or fees or failure to complete educational requirements). The Directors may order suspension unconditionally, or they may, at their discretion, give the disciplined member the option of paying to the Board, within such time as the Directors shall designate, an assessment in an amount fixed by the Directors, which may not exceed $15,000 and which can be utilized only once in any three (3) year period, in lieu of accepting suspension. But, if the conduct for which suspension is ordered consists of failure to submit a dispute to arbitration, the Directors may not permit the disciplined member to avoid suspension without submitting to the arbitration in addition to paying the assessment, unless in the meanwhile the dispute has been submitted to a court of law without any objection by any party that it should be arbitrated; (Amended 11/13)
6. Expulsion of individual from membership with no reinstatement privilege for a specified period of one (1) to three (3) years, with reinstatement of membership to be by application only after the specified period of expulsion on the merits of the application at the time received (decision should be written clearly articulating all intended consequences, including denial of MLS participatory or access privileges); (Amended 4/96)
7. Suspension or termination of MLS rights and privileges may also be utilized. Suspension of MLS services may be no less than thirty (30) days nor more than one (1) year; termination of MLS services shall be for a stated period of one (1) to three (3) years; (Amended 5/02)
8. REALTORS® who are not members of a Board from which they purchase the multiple listing service and their users and subscribers remain obligated under the Code of Ethics on the same terms and conditions as REALTORS® and REALTOR-ASSOCIATE® members of that Board. Discipline that may be imposed may be the same as but shall not exceed the discipline that may be imposed on that Board's members. Boards entering into regional or reciprocal MLS agreements are encouraged to include provisions requiring signatory Boards to respect, to the extent feasible, decisions rendered by other Boards involving suspension or expulsion from membership or from MLS. (Amended 4/96)
9. Members may also be required to cease or refrain from continued conduct deemed to be in violation of the Code, or to take affirmative steps to ensure compliance with the Code, within a time period to be determined by the hearing panel. Where discipline is imposed pursuant to this subsection, the decision should also include additional discipline (e.g., suspension or termination of membership) that will be imposed for failure to comply by the date specified, and to continue to comply for a specified period not to exceed three (3) years from the date of required compliance. (Adopted 05/14)

In addition to imposing discipline, the Hearing Panel can also recommend to the Board of Directors that the disciplined member be put on probation. Probation is not a form of discipline. When a member is put on probation the discipline recommended by the Hearing Panel will be held in abeyance for a stipulated period of time not longer than one (1) year. Any violation of the Code of Ethics which occurs during the probationary period may, at the discretion of the Board of Directors, result in the imposition of the suspended discipline. Absent any violation during the probationary period, both the probationary status and the suspended discipline are considered fulfilled, and the member's record will reflect the fulfillment. The fact that one or more forms of discipline will be held in abeyance during the probationary period does not bar the imposition of other forms of discipline which will not be held in abeyance. (Revised 11/23)

In addition to any discipline imposed, Boards and Associations may, at their discretion, impose administrative processing fees not to exceed $500 against respondents found in violation of the Code of Ethics or other membership duties. Any administrative processing fee will be in addition to, and not part of, any disciplinary sanction imposed. Boards and Associations shall determine in advance when, and under what circumstances, administrative processing fees will be imposed so that imposition is a matter of administrative routine. (Revised 5/13)

Board Officers and Hearing Panels should consult with the Board attorney and refer to the Case Interpretations as well as the Board bylaws and this Code of Ethics and Arbitration Manual for additional assistance in properly enforcing the Code of Ethics.

This Manual has been prepared as a guide to local Boards and State Associations as to the procedures to be followed in bringing disciplinary action against members or hearing business disputes submitted to arbitration. It is a revision of the Code of Ethics and Arbitration Manual first adopted in 1973 and subsequently revised in 1976, 1980, 1982, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023. The first edition of this Manual was closely patterned after the Code of Ethics and Arbitration Manual of the California Association of REALTORS® that had been utilized by the local Boards in that state since January 1965. The initial favorable experience of California Boards and subsequently of Boards throughout the nation gives credence to the procedures contained in the Manual. The current edition incorporates revised provisions that reflect the experience and suggestions from Member Boards approved by the Professional Standards Committee and the Board of Directors of the National Association.

Authority: Article VIII, Section 3, Constitution, National Association of REALTORS®, states:

There shall be a Professional Standards Committee. It shall be the duty of this Committee to interpret the Code of Ethics, to consider and recommend appropriate action on inquiries of Member Boards and Board Members concerning enforcement thereof, and to recommend amendments thereto as it deems necessary or advisable.

It shall be the duty of this Committee to:

1. interpret the Code of Ethics
2. consider and recommend appropriate action on inquiries of Member Boards and Board Members concerning enforcement thereof
3. recommend amendments thereto as it deems necessary or advisable

In fulfillment of its responsibility, the Professional Standards Committee has reviewed the content of this Manual, including the revisions made therein, and has adopted said Manual to be provided and recommended to local Boards and State Associations for adoption and incorporation into their respective bylaws, subject to review and adaptation by their legal counsel. This review and adaptation ensures that the procedures adopted by the local Board or State Association are consistent with the policies adopted by the National Association and with the requirements of law of the state in which they are located.

In no event should the Manual be adopted by a local Board or State Association without first having been approved by Board legal counsel. In this connection, it may be necessary for counsel to modify certain of the procedures described to assure that they are consistent with the state arbitration statute, if one is in effect. The adoption and incorporation of this Manual into the bylaws of the local Board or State Association, adapted and modified as may be necessary to ensure consistency with applicable law, will also ensure appropriate enforcement of the Code of Ethics and the establishment of appropriate arbitration procedures by the Member Boards. In the absence of adopting this recommended Manual and incorporating it into the bylaws, a Member Board is required by the National Association to establish appropriate Professional Standards procedures, to have them reviewed by Board legal counsel, and to provide to the National Association a letter from Board counsel indicating that such a review assures due process in Professional Standards procedures of the Board, and that they comply with applicable laws of the state. Such procedures must also comply substantively with the policies and procedures set forth in this Manual to the extent that such policies and procedures are consistent with applicable law.

Objectives: The courts have held that membership in a local Board is a valuable property right. It cannot be taken away without justifiable cause, whether provided for in the bylaws or not. The right to use the term “REALTOR®” or “REALTOR-ASSOCIATE®,” or to retain membership in a local Board, may not be withdrawn without the members being given reasonable opportunities to defend themselves. Failure to afford adequate “due process” in controversies involving the Code of Ethics or arbitration can, and in some instances already has, subjected the Boards and their members to adverse litigation.

This Manual, therefore, with appropriate modifications, which any local Board can adopt into its bylaws by reference, has the following objectives to:

1. provide a procedure which will be upheld by the courts
2. clearly define to members the types of conduct which may result in disciplinary action being taken
3. sufficiently outline the procedures so that officers of the Board from year to year can readily learn how to proceed in accordance with the Bylaws and general state law
4. eliminate haphazard methods which may result in confusion and dissatisfaction
5. clothe the disciplinary body with dignity which will demand respect by those brought before it
6. give the disciplinary body stability so that it may not be subject to personal pressure
7. create a method of settling business disputes which will command public respect and confidence of members
8. better protect the Board against legal actions, whether substantive or of the “nuisance” nature
9. require members to arbitrate those contractual and specific non-contractual disputes defined by this Manual within the framework of the Board rather than a court of law
10. give members reasonable assurance that:
    1. the Code of Ethics will be enforced
    2. the procedure will protect them against unfair and unsubstantiated charges
    3. only respected and qualified persons will sit in peer judgment
    4. protection is given against the necessity of expensive and unjustified legal actions