CHANGES TO THE 2022 GAR CONTRACTS
The GAR Forms Committee has improved language for 2022, making the forms more precise and easier to use. Please review the following changes to the 2022 GAR Contracts and Forms. There are additional minor changes that are not addressed here, so be sure to review new forms before you use them! The new forms will be effective on 1/1/2022!
Variable Rate Commission Agreements Must be Disclosed to Potential Cooperating Brokers
Very often, a Listing Agent will discount commission if there is no cooperating broker in the transaction or if listing broker’s own firm is the cooperating broker. In such cases, Article 3, Standard of Practice 3.4 directs REALTORS® requirements for disclosure. The Listing Broker must disclose such variable rate agreements to potential cooperating brokers as soon as practical.
The logic is simple. Potential cooperating brokers should be placed on a level playing field with agents from the listing agent’s own firm or the listing agents themselves.
All other terms being equal, a seller is naturally going to choose the offer that nets the most money. Where the listing agent has agreed to a discounted commission if he or his firm is also the selling agent, there is a financial advantage to the seller to accept the listing agent‘s or firm’s offer over any cooperating agent’s offer.
Further, the listing agent must disclose to the co-op agent the money or percentage difference between the cooperative (out-house”) transaction vs. the “in house” transaction. Then that information must be disclosed to the potential buyer by the potential co-op agent before the client makes an offer to purchase.
Code of Ethics Article 3 Standard of Practice 3.4
REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease.
The following example is on point.
Case #3-8: REALTOR®’s Obligation to Disclose Dual Commission Arrangements
REALTORS® A and B were members of the same Association and Participants in the MLS. REALTOR® A, cooperating with REALTOR® B on REALTOR® B’s listing, submitted an offer to purchase signed by buyers offering the listed price, and a check for earnest money. The only contingency was a financing contingency, and REALTOR® A shared with REALTOR® B the buyers’ loan prequalification letter. The following day, REALTOR® B emailed the offer back to REALTOR® A with “REJECTED” written on it and initialed by the seller, and explained that the seller had accepted another offer secured by one of REALTOR® B’s sales Associates. REALTOR® A inquired about the seller’s reason for rejecting the full price offer with only a mortgage contingency, and what had caused the seller to accept the other offer. REALTOR® B responded that he did not know, but with equal offers, he supposed the seller would favor the offer secured by the listing broker.
Later, REALTOR® A saw the seller at a dinner party. The seller thanked him for his efforts in connection with the recent sale of the seller’s home. The seller hoped REALTOR® A understood there was nothing personal in his decision, adding that the money he saved through his “special agreement” with REALTOR® B had been the deciding factor. When REALTOR® A asked about the “special agreement,” the seller explained he had signed a listing agreement for the sale of his property which authorized the submission of the listing to the Multiple Listing Service and specified a certain amount of compensation. However, the seller stated that he had also signed an addendum to the listing agreement specifying that if REALTOR® B sold the listing through his own office, a percentage of the agreed compensation would be discounted to the seller’s credit, resulting in a lower commission payable by the seller.
REALTOR® A filed a complaint with the Association of REALTORS® against REALTOR® B, alleging a violation of Article 3. After its review of the complaint, the Grievance Committee requested that an ethics hearing be arranged.
REALTOR® A, in restating his complaint to the Hearing Panel, said that REALTOR® B’s failure to disclose the actual terms and conditions of the compensation offered through the MLS resulted in concealment and misrepresentation of pertinent facts to REALTOR® A and to the prospective buyers served by REALTOR® A who had, in good faith, offered to purchase the property at the listed price with only a mortgage contingency. REALTOR® A told the Hearing Panel that if he had known the facts which were not disclosed by REALTOR® B, he could have fully and accurately informed the buyers who could have taken those facts into consideration when making their offer. As it was, said REALTOR® A, the buyers acting in good faith were deceived by facts unknown to them because they were unknown to REALTOR® A. Further, REALTOR® A said that REALTOR® B’s failure to fully disclose the true terms and conditions relating to compensation made it impossible to have a responsible relationship with REALTOR® B and make proper value judgments as to accepting the offer of compensation.
REALTOR® B stated that it was his business what he charged and the Association or MLS could not regulate his charges for his services. If he wished to establish a dual commission charge by agreement with his client, that was his right, and there was no need or right of the Association or MLS to interfere.
The Hearing Panel agreed that it was REALTOR® B’s right to establish his fees and charges as he saw fit, and that the Association or MLS could not and would not interfere. However, the Hearing Panel noted that his complete freedom to establish charges for his services did not relieve him of his obligation to fully disclose the real terms and conditions of the compensation offered to the other Participants of the Multiple Listing Service, and did not justify his failure to disclose the dual commission arrangement. In the case of a dual commission arrangement, the listing broker must disclose not only the existence of the “special arrangement” but also must disclose, in response to an inquiry from a potential cooperating broker, the differential that would result in the total commission in a cooperative transaction. The Hearing Panel concluded that by submitting a listing to the MLS indicating that he was offering a certain amount of compensation to cooperating brokers while other relevant terms and conditions were not disclosed to the other MLS Participants, he had concealed and misrepresented real facts and was in violation of Article 3 of the Code of Ethics.
The short answer is No. A tenant seeking and advertising for a roommate is not covered by the Fair Housing Act (FHA). The long answer is more complicated. It involves a 9th Circuit Appellate case that distinguishes the roommate situation from the FHA. For those of you that want the legal explanation, read on.
“Dwellings” As Defined By the Fair Housing Act
The FHA is very broad-based legislation that prohibits discrimination in housing on the basis of “race, color, religion, sex, familial status, or national origin” in the “sale or rental of a dwelling.” 42 U.S.C. § 3604(b) . Dwelling is the operative word, according to the 9th Circuit decision, Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, 666 F.3d 1216 (9th Cir. 2012).
The FHA does not interfere with relationships inside the home.
The FHA defines “dwelling” as “any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families.” Id. § 3602(b). A dwelling is thus a living unit designed or intended for occupancy by a family, meaning that it ordinarily has the elements generally associated with a family residence: sleeping spaces, bathroom and kitchen facilities, and common areas, such as living rooms, dens and hallways.
The Court concluded that there is no indication that Congress intended to interfere with personal relationships inside the home. Congress wanted to address the problem of landlords discriminating in the sale and rental of housing, which deprived protected classes of housing opportunities. But a business transaction between a tenant and landlord is quite different from an arrangement between two people sharing the same living space. According to the Court, Congress did not mean for the FHA to apply to people sharing the same living spacc. Consider, for example, the FHA's prohibition against sex discrimination. Could Congress, in the 1960s, really have meant that women must accept men as roommates? Telling women they may not lawfully exclude men from the list of acceptable roommates would be controversial today; it would have been scandalous in the 1960s. By extension, “Female seeking female roommate” would be allowable under this case.
There are also Constitutional concerns with applying the Fair Housing Act to roommate situations. The Court concluded that the roommate relationship is so personal and intimate that potential government interference with that relationship raises significant Constitution concerns, and is unwarranted. The Court reasoned that the roommate relationship falls under the ambit of the fundamental right of intimate association, which, necessarily, also includes the right not to associate. The Court extended to roommate selection the same level of Constitutional protection afforded to “marriage, child-bearing, child rearing and cohabitation with relatives.” Our roommates, the Court reasoned, have unique access to every aspect of our personal home lives, and, we, likewise, have unfettered access to every aspect of theirs. We have a right, therefore, to select our roommates based upon our personal beliefs and opinions regarding things that may be offensive, dangerous, annoying, or otherwise incompatible with our own lifestyles. Extending the FHA anti-discrimination provisions to apply to the roommate relationship would permit the government to intrude into our homes, which are “entitled to special protection as the center of the private lives of our people.” Accordingly, it is perfectly reasonable for a woman to seek only female roommates.
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