Make Your Arbitration Decisions Stick

Follow the NAR arbitration instruction manual to avoid wasting time and money to clean up the mess of overturned judgments.

There are two types of Ikea customers: those who follow instructions and those who don’t. I was in the latter category. After spending an inordinate amount of time studying the instructions, assembling, disassembling, and reassembling parts to build my desk, I decided to abandon the directions and follow my gut. Through pure ingenuity, it took less than 20 minutes and I didn’t worry all the dowels, screws, and nuts that were obviously unnecessary. I was proud of that desk. It appeared to be sturdy. I placed my computer and books on it and watched as it creaked and then snapped, sending everything crashing to the floor.

Now I know. Following instructions can save you time, money, and a big mess. Choosing not to follow even the small steps can make a big difference. This is especially true when it comes to the arbitration and ethical hearing proceedings of the National Association of REALTORS® Code of Ethics and Arbitration Manual

Since its adoption in 1913, the Code of Ethics and Professional Standards has been a guiding light helping REALTORS® serve the best interests of consumers, create and administer cooperative arrangements, and resolve disputes. Enforcement of the Code of Ethics and Professional Standards is a privilege and responsibility of each local REALTOR® association. REALTOR® members and their clients rely on associations to fairly resolve their arbitration disputes and ethical grievances by adhering to the rules and procedures set forth in NAR’s Code of Ethics and Arbitration Manual. Courts have upheld those arbitration judgments when the NAR process was followed, and the hearing was fair but have overturned them when procedures weren’t followed. 

For example, a 2008 North Central Mississippi Board of REALTORS® ethics panel found two members, a broker and an agent, guilty of violating the Code of Ethics. The ethical violation centered around an agent who input two properties into the MLS without the seller’s authorization and the broker who failed to stop the action. The members were sanctioned with a $1,500 fine, a 45-day suspension for the broker, and expulsion of membership for one year for the agent. The members argued that the input was a clerical error and, once discovered, the listings were removed.

The members sued the association and the court reversed the decision, ruling that the association failed to follow the guidelines set forth by NAR for conducting ethics hearings and that the penalty was arbitrary and harsh.

On the flip side, two arbitration decisions were upheld by the courts in 2015. In ­Sotheby’s International Realty Inc. v. Relocation Group LLC, the U.S. Court of Appeals upheld the arbitration award issued by the Greenwich Association of REALTORS®, Conn. There, the court noted that great deference is shown to an arbitration panel’s decision unless some egregious impropriety on the part of the arbitrators is found. 

In The Maine Real Estate Network v. E to P LLC, the respondent filed a motion to vacate the $4,750 award it was ordered to pay in arbitration on the grounds that the arbitrators did not make any findings of fact or conclusions of the law to support the award and declined to release the tape of the arbitration proceedings. Yet the court upheld the arbitration award, finding that arbitrators are not required, under the Code of Ethics and Arbitration Manual, to make findings of fact and conclusions of the law.  

As you can see from these cases, following the rules and procedures set forth in NAR’s Code of Ethics and Arbitration Manual will protect your association from having your arbitration decisions overturned in court. It also imbues more trust and confidence from REALTOR® members and their clients in the arbitration and professional standards hearing processes. 

Here are some practical tips for boards and associations to follow: 1) Make sure the administrator for your professional standards process has completed their training on professional standards administration. 2) Select an impartial panel. 3) Treat everyone fairly and equally. 4) Work with legal counsel. 5) Know the rules, procedures, and best practices. 6) Contact NAR staff with any questions.  

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