Have the right association legal counsel at the ready.
By Katherine Raynolds
“Have you been injured and are in need of an attorney, but don’t know how to find the right one? We can help.” That quote may have been taken right out of a late-night commercial for personal-injury attorneys, but it may also be relevant to you. If your association doesn’t obtain adequate legal counsel when necessary, it may be seriously injured.
The legal needs of Realtor® associations vary greatly, depending on size and activities. Your association may want to retain a general counsel for overall guidance on operating the organization. You may prefer to hire a lawyer when particular needs arise. Or you may want to develop a long-term, continuous relationship with a legal counsel or firm that will be able to assist the association in all of its needs.
Whatever role legal counsel will play within your organization, the same basic steps apply during the search and selection.
First, identify your specific needs. For example, will your attorney be reviewing MLS changes, vendor contracts, software licenses, employment contracts, or tax documents? Create a list of your needs and refer to it as you interview candidates.
Second, ask potential hires about their skill and experience with business law, contracts and forms, tax matters, and campaign fundraising. It’s also important to gauge their willingness to learn NAR’s Code of Ethics and enforcement procedures, as well as their interest in staying abreast of legal trends affecting the real estate industry.
Must know business law
Every association will need legal assistance at some time to ensure compliance with federal, state, and local business laws. Such assistance may include drafting or amending the association’s bylaws and MLS rules and regulations; knowing and adhering to local, state, and federal tax and other filing requirements; and maintaining business licenses and permits.
Since associations have unique legal concerns, an attorney with experience counseling trade associations is ideal. For example, board leadership and members may need advice on complying with federal and state antitrust laws and other risk management issues. Not-for-profit associations may seek guidance regarding tax exemptions and unrelated business income. To find a law firm with association experience, try contacting other trade or professional associations in your area, such as local chapters of homebuilders associations, community associations, building and office management associations, and the chamber of commerce.
Can review contracts and forms
You may want to have an attorney review the particularly complex or expensive agreements you enter into with vendors, venues, speakers, and the like. But when it comes to drafting or revising real estate forms published by the association, it is crucial that the association counsel know the federal, state, and local real estate laws. If your association attorney isn’t intimately familiar with real estate law, he or she shouldn’t be drafting your forms.
Know the Code and enforcement procedures
Since NAR’s Code of Ethics and its enforcement procedures are often at the core of legal challenges, it is imperative that you find legal counsel committed to becoming knowledgeable about the Code and its enforcement procedures. In the event that the association is faced with circumstances that are novel, unique, or particularly contentious, it may be necessary for the attorney to attend a professional standards or arbitration hearing, review the hearing panel’s finding of fact from those hearings (ethics only), and review the suitability of the sanctions the panel selects. The association’s enforcement procedures should also be reviewed by legal counsel to ensure that they conform in principle with NAR’s Code of Ethics, afford due process, and otherwise comply with state law.
REALTORS® Political Action Committee
An association may want to seek guidance from a knowledgeable attorney to ensure compliance with federal, state, and local election laws before engaging in fundraising activities.
Education on legal trends
A dedicated attorney will keep up-to-date on developments in areas of law affecting association members, including real estate transactions, agency, civil rights, and antitrust law. The attorney should keep current in these areas so he or she can answer questions from the leadership of the board and educate members on the developments that affect their business. NAR’s Letter of the Law newsletter is a great resource for legal trend information. In addition, an association should try to send its counsel to the periodic legal seminars sponsored by NAR and, in some cases, state associations.
Conflicts of interest
An attorney’s representation of an association may produce conflicts of interest in a variety of ways. First, a conflict could arise if the prospective attorney also represents local brokers and agents in real estate transactions. A conflict could also occur if the attorney is a personal friend of a local broker or agent who is a party to a professional standards matter. Additionally, a conflict may come up if the prospective attorney represents a neighboring association, in the event of a dispute between those associations. The presence of a conflict does not necessarily preclude you from hiring that attorney. However, the AE and the prospective attorney should clearly articulate in writing the potential conflicts that exist and the manner of proceeding if conflicts arise.
Retainer agreement and compensation
Typically, the attorney will draft the retainer agreement, but the association should insist that the agreement specify the fees that will be charged for a lawyer’s services. There are various ways to structure a retainer and compensation agreement.
Finding an attorney with expertise in all of these legal areas may be difficult. The best advice is to retain an association attorney with a strong background in not-for-profit associations who demonstrates a willingness to learn NAR’s professional standards. As necessary, the association may then obtain guidance from attorneys who specialize in other areas, such as tax and employment law.
In addition to relying on local counsel for legal assistance, AEs are encouraged to take ad-vantage of the expertise of NAR’s Legal Affairs department. Contact one of the department’s attorneys by phone or e-mail for assistance with your legal inquiries. nar.realtor is another valuable resource for legal education and guidance. Check out the Law and Policy page, the Letter of the Law newsletter, and browse the documents posted on the Realtor® Association Resource Exchange.
Ten Things You Need a Lawyer For
Reviewing association documents, programs, and activities to ensure antitrust compliance
Drafting or reviewing amendments to association bylaws and MLS rules and regulations
Guiding or attending, when necessary, professional standards and arbitration hearings that present novel issues or have potential to be particularly contentious
Copyrighting MLS compilations and other creative works
Drafting and reviewing contracts and license agreements
Overseeing the association’s compliance with state and federal tax and corporate filing requirements
Advising on the lawfulness of campaign fundraising efforts
Reviewing the association’s denial, suspension, or termination of membership rights
Protecting the association against various liability risks
Representing the association in litigation and inquiries that could lead to litigation
5 Traits to Seek in an Association Attorney
Dedication to learning about the uniqueness of Realtor® associations and the Code of Ethics
Availability to respond to the association’s questions and immediate needs
Thorough understanding of operating a corporation or not-for-profit corporation
Experience in the specific legal area for which the association seeks guidance
Integrity and professionalism in oral and written communications