On the Front Lines of Legal Challenges & Trends

New legal publication from NAR delivers timely insights on the legal issues, new laws, and risks facing members.

The legal landscape is anything but static. Every day, judges overturn long-held case law, legislatures toss out and rewrite statutes, and regulatory authorities come up with new and exciting ways to keep folks busy trying to stay out of trouble. For real estate professionals, knowing the law as of now—as opposed to the law as of 10 months ago—is imperative. And AEs are keenly aware of how vital it is for their members to stay apprised of the legal risks and compliance challenges they may be facing on tomorrow’s front lines.

For more than 20 years, NAR’s Legal Affairs team has been closely tracking and compiling data on emerging legal issues that directly affect real estate professionals. Historically, compiled data was published once every two years in the now-retired Legal Scan, a hefty document whose contents spanned the previous 24 months of real estate-related legal happenings. In 2013, Legal Affairs set out to create a new tool for industry professionals that would release more timely legal updates in a shorter, more easily palatable format. Thus was born The Legal Pulse Newsletter, the first issue of which was published in early May of this year.

The Legal Pulse offers succinct summaries of cases and statutory and regulatory changes from the previous three months that affect the real estate community. In addition, it sets forth national legal trend data by topic, tracking spikes in litigation in particular subject matters. The newsletter is issued quarterly and focuses on three of the most common subjects presenting litigation and compliance risks to brokers and agents: agency (very often situations in which disgruntled buyers or sellers seek to hold brokers liable for the acts of their salespeople), property condition disclosure disputes, and RESPA issues, including cases related to affiliated business arrangements, kickbacks, fee-splitting, and statutory disclosure requirements. In addition, each release of the Legal Pulse features an issue-specific topic that highlights an especially hot-button matter from the previous quarter. May’s issue, for example, featured employment-related litigation disputes, including a suit premised on the breach of an employment contract, a class-action suit addressing employee misclassification and independent contractor status, and a bad-faith termination claim.

2014’s second issue of the Legal Pulse, due out in early September, is currently in the works, and key cases and statutory developments are being identified on an ongoing basis. A few teasers for the next publication: In the arenas of agency, employment, and fiduciary duty: Does a buyer’s real estate agent owe a fiduciary duty to a seller, even if that seller is represented by a different salesperson? According to a California court of appeals, if both agents are licensed with the same broker, the answer is “yes.” In Horiike v. Coldwell Banker, the buyer of a luxury Malibu property brought suit for breach of fiduciary duty against the seller’s salesperson, claiming that he had overstated the square footage of the mansion’s living space by more than 5,000 square feet. The trial court dismissed the cause of action against the seller’s agent, holding that he owed no fiduciary duties to the buyer. The appellate court reversed, finding that by merit of the fact that both the buyer’s agent and the seller’s agent were licensed under the same broker, a dual agency relationship had been created, and the seller’s agent owed the buyer the same fiduciary duties owed by his broker. (The full opinion is available at www.courts.ca.gov/opinions/documents/B246606.PDF.)

In the arenas of commission entitlement and procuring cause: Where 18 months have passed since a broker showed a duplex condominium to a potential buyer, and where the buyer ends up selecting a different unit entirely from that originally shown by the broker, can the broker still be considered the “procuring cause” of the sale? The Supreme Court of New York County recently held that if the right circumstances are present, the answer may very well be “yes.” SPRE Realty v. Daniel Dienst et al. sheds some light on the kinds of situations that determine whether a broker is entitled to commission under New York law. (The full opinion is available at http://caselaw.findlaw.com/ny-supreme-court-appellate-division/1667231.html.)

Each issue of The Legal Pulse Newsletter will be published at nar.realtor/publications/legal-pulse. In addition to the written publication, the Legal Affairs team also prepares an accompanying five-minute video recap of the previous quarter’s research, available at the same Web page. Back issues of The Legal Pulse Newsletter will also be archived and available at the same Web address.

AEs should feel free to republish The Legal Pulse Newsletter on their websites. Please reprint the publication only in its entirety, and be sure to give NAR credit for the publication. In addition, AEs can encourage their members to use The Legal Pulse Newsletter as a teaching tool in broker office meetings, continuing education seminars, and other situations where risk management and compliance will be discussed.

Look for an announcement of the next issue in the AE INS and the NAR Member's Edge newsletters.

For more on the newsletter, contact Finley Maxson, NAR senior counsel, at fmaxson@realtors.org, or Jessica Edgerton.

Jessica Edgerton is associate counsel at the National Association of REALTORS®. Contact her at 312-329-8373 or jedgerton@realtors.org.