Staying Out of Court

Follow these best practices for professional standards

Over the past couple of years, more respondents than ever are challenging the outcome of professional standards hearings and the procedures followed by the associations handling these matters. Associations can help reduce the risk of a legal challenge by adhering to established procedures and ensuring due process for all parties.

In 2021, professional standards claims accounted for a record 20% of all claims filed on the National Association of REALTORS® professional liability policy; all these claims related to ethics hearings. In 2020, challenges to ethics hearings comprised only 4% of all claims, possibly due to hearings being held in abeyance during the COVID-19 pandemic. However, the rate of claims arising from ethics proceedings alone has increased threefold since 2017. There’s no clear indication of what is driving this increase in challenges to ethics proceedings.

These statistics emphasize the importance of associations minimizing their risks by consistently adhering to the Code of Ethics and Arbitration Manual when handling professional standards cases. In the past, courts have deferred to the rules and procedures of the CEAM because it ensures due process and fairness to all parties.

A recent court decision illustrates the significance of fairly and consistently applying the CEAM. Respondents in an ethics proceeding demanded that a court reporter record their appeal hearing; the association denied the respondents’ request, relying on the CEAM, which specifically does not allow appeal hearings to be recorded. Respondents petitioned the court to force the association to permit the recording. The court denied the petition, stating that the CEAM’s rule against recording an appeal proceeding was “unambiguous.” The court further noted that “[Respondents’] constitutional due process rights do not include the right to alter or revise the disciplinary procedure of the association, which they voluntarily joined and in which they agreed to abide by the governing bylaws, rules and regulations.”

To help your association minimize its risks and successfully defend a challenge of a professional standards proceeding, follow these best practices:

  • Consider using the resources and guidance available in the CEAM. It’s strongly recommended that the sample forms, hearing scripts and arbitration worksheet provided in the CEAM are implemented and that disciplinary guidelines are followed. Hearing panels should also make note of any Case Interpretation that may be helpful.
  • Provide annual training for Grievance Committee and Professional Standards Committee members. While not required by NAR policy, annual training will reinforce the principles of due process and focus on changes to the Code of Ethics, the Statements of Professional Standards Policy and new Case Interpretations.
  • Rely on association counsel. Counsel can and should attend hearings, especially where complex or unique issues are present. Counsel can also provide pre-hearing guidance on due process and evidentiary issues and review the Findings of Fact to identify any factual gaps and potential issues.

While there are no guarantees that an unhappy respondent or complainant will not file a lawsuit or make other demands on an association, adhering closely to the CEAM’s established processes and procedures will help put the association in the best possible position should a challenge arise.

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