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The Case Interpretations offer examples of the practical application of the Code in professional standards enforcement and help REALTORS® understand the ethical obligations created by the Code of Ethics. View the Preface to Case Interpretations to learn more about their history/background.
Case # 17-1: Obligation to Submit to Arbitration
(Revised Case #14-2 May, 1988. Transferred to Article 17 November, 1994. Revised November, 1995. Revised November, 2001 and May, 2017.)
REALTOR® A and REALTOR® B had been engaged in a cooperative transaction that resulted in a dispute regarding entitlement to compensation. Rather than requesting arbitration before the Association of REALTORS®, REALTOR® A filed suit against REALTOR® B for payment of the compensation he felt REALTOR® B owed him. Upon receiving notification of the lawsuit, REALTOR® B filed a request for arbitration with the Association, which was reviewed by the Grievance Committee and found to be a mandatory arbitration situation. REALTOR® A was advised of the Grievance Committee’s decision, but refused to withdraw the lawsuit. Thereupon, REALTOR® B filed a complaint with the Board charging a violation of Article 17 as supported by Standard of Practice 17-1.
REALTOR® A was directed to be present at a hearing on the complaint before the Board of Directors. Evidence that REALTOR® B had sought REALTOR®R A’s agreement to submit the dispute to arbitration was presented at the hearing. REALTOR® A defended his action in filing the suit and refusing to submit to arbitration by asserting that under laws of the state, the Association of REALTORS® had no authority to bar his access to the courts or to require him to arbitrate his dispute with REALTOR® B.
The Board of Directors concluded that REALTOR® A was correct as to his legal right and as to the Association’s lack of any right to prevent him from filing a suit. It was pointed out to REALTOR® A, however, that the Association of REALTORS® is a voluntary organization, whose members accept certain specified obligations with respect to their relations with other REALTORS®, and that if he wished to continue as a member of the Association, he would be obliged to adhere to the Association’s requirements as to arbitration.
Because REALTOR® A would not withdraw the litigation, the Board of Directors concluded that REALTOR® A was in violation of Article 17 for refusing to arbitrate in a mandatory arbitration situation. However, it was noted that if REALTOR® A had filed litigation against REALTOR® B, and had REALTOR® B then requested arbitration with the Grievance Committee determining that an arbitrable issue of a mandatory nature existed, REALTOR® B might have successfully petitioned the court to remand the matter to the Association for arbitration, and there would have been no finding of a violation of Article 17 since the Association’s arbitration process would have been ultimately complied with.
Case #17-2: Dispute Between REALTORS® in Different Boards
(Revised Case #14-6 May, 1988. Transferred to Article 17 November, 1994. Revised November, 1995.)
REALTOR® A cooperated in the sale of a commercial property with REALTOR® B, the listing broker. REALTOR® A is a member of the XYZ Board of REALTORS®, and his office is located in the XYZ Board. Both the property and REALTOR® B’s office are located within the jurisdiction of the ABC Board of REALTORS® where REALTOR® B is a member. A dispute arose between REALTORS® A and B over the division of the commission.
REALTOR® A filed a request for arbitration with the Professional Standards Committee of his Board. The President of the Board, when advised of the contractual dispute, subsequent to the Grievance Committee finding the matter arbitrable and of a mandatory nature, notified the President of REALTOR® B’s Board and requested interboard arbitration in accordance with Article 17 of the Code of Ethics. The arbitration request was brought before the Grievance Committee of REALTOR® B’s Board which also determined that the dispute was arbitrable and of a mandatory nature.
One week before being notified of his Grievance Committee’s decision, REALTOR® B filed suit against REALTOR® A. The Board of Directors of the ABC Board notified REALTOR® B to appear and answer to a charge of violation of Article 17 when REALTOR® B did not withdraw the suit subsequent to being informed that both Grievance Committees had found the issue arbitrable and mandatory.
REALTOR® B described his contractual dispute to the Directors and stated that he knew REALTOR® A had requested arbitration because he had received a copy of the request. REALTOR® B maintained that he had filed suit because REALTOR® A was in another Board’s jurisdiction and he did not think anything would come of the request since he, REALTOR® B, was not a member of the XYZ Board.
REALTOR® B was advised that since both Grievance Committees had determined the matter was arbitrable and mandatory that interboard arbitration was being scheduled to hear the dispute. The Board of Directors concluded that his action in filing suit was not in itself in violation of Article 17 but advised REALTOR® B that if he failed to withdraw from the suit and participate in the interboard arbitration, he could be found in violation of Article 17.
Case #17-3: Dispute Between REALTORS® of Different Boards
(Reaffirmed Case #14-7 May, 1988. Transferred to Article 17 November, 1994.)
REALTOR® B then requested his Board, the Y Board of REALTORS®, to contact the X Board of REALTORS® for the purpose of arranging interboard arbitration as provided for in Article 17 of the Code of Ethics. The Y Board of REALTORS® refused, pointing out that REALTOR® B had voluntarily accepted the proposal to have the matter arbitrated by the X Board of REALTORS®; that he had agreed to be bound by the Hearing Panel’s decision; had participated in the arbitration proceeding; and having done so, he was not, following an adverse decision, entitled to initiate another arbitration hearing.
Case #17-4: Dispute Involving REALTOR® Holding Membership in Two Boards
(Revised Case #14-8 May, 1988. Revised and transferred to Article 17 November, 1994.)
REALTORS® A and B, disputants in an arbitrable issue, both belonged to the X Board of REALTORS®, a large Board in the central city of a metropolitan area. REALTOR® B also maintained a branch office in a nearby suburb and was also a member of the Board having jurisdiction in that area, the Y Board of REALTORS®.
REALTOR® A filed a written request with the X Board of REALTORS® for arbitration. REALTOR® B was notified and advised of the date of the hearing.
REALTOR® B replied that because he considered himself primarily a member of the Y Board of REALTORS®, he would proceed through the Y Board of REALTORS® and would request interboard arbitration as provided for in Article 17 of the Code of Ethics.
Upon consideration by the Board of Directors of the X Board of REALTORS®, the request for interboard arbitration was refused. Regardless of which of the two Boards REALTOR® B considered to be his primary Board, he was a member of the X Board. Since both parties to the dispute were members of the X Board, there was no need for interboard arbitration and the matter was arbitrated by the X Board.
Case #17-5: Time of Dispute a Determining Factor as to Arbitration
(Revised Case #14-10 May, 1988. Transferred to Article 17 November, 1994.)
REALTOR® A belonged to an All-REALTOR® Board (one in which all nonprincipal brokers and salespersons as well as principals are eligible for REALTOR® membership). Salesperson B had been a REALTOR® for a number of years and had been associated as an independent contractor with REALTOR® A during that time. Salesman B showed a property to Prospect C, who subsequently purchased the property through Salesman D, who also was affiliated with REALTOR® A. Salesman D was also a REALTOR® Member of the Board.
There was considerable dispute over the facts of the situation, but REALTOR® A finally paid the sales commission to Salesman D but admitted that the written office policies did not precisely cover the circumstances. Salesman B demanded a share of the commission and, upon REALTOR® A’s refusal to pay it to him, transferred his license to REALTOR® E’s firm.
REALTOR® E and Salesman B joined in a request for arbitration of the dispute with REALTOR® A stating that Article 17 required the arbitration of disputes between REALTORS® associated with different firms.
REALTOR® A refused to arbitrate on the basis that the dispute had arisen while he and Salesman B were associated with the same firm and that it was an internal matter which he was not required to arbitrate.
The matter was referred to the Board of Directors, consistent with the Board’s Code of Ethics and Arbitration Manual. After a hearing, the Board of Directors ruled that the deciding factor was the relationship between the REALTORS® at the time the dispute arose rather than at the time the demand for arbitration was made. Therefore, REALTOR® A was not required to arbitrate the matter and was not in violation of Article 17.
Case #17-6: Request for Arbitration Expenses
(Reaffirmed Case #14-11 May, 1988. Transferred to Article 17 November, 1994.)
REALTOR® A, the listing broker, and REALTOR® B, a cooperating broker, engaged in a heated dispute as to which REALTOR® was the procuring cause of a sale and, therefore, entitled to the commission. Finding that they could not resolve the matter themselves, they agreed to arbitrate in accordance with Article 17 of the Code of Ethics.
REALTOR® A initiated the request for arbitration with a letter to the Board; the letter was received and reviewed by the Grievance Committee which agreed that it was an arbitrable matter. The case was sent on to the Professional Standards Committee for a hearing.
The President of the Board, consistent with the Board’s Code of Ethics and Arbitration Manual, appointed a five-member Hearing Panel to hear the case. The proper forms agreeing to the arbitration were sent to both REALTORS®, each signed his agreement and returned it to the Professional Standards Administrator. Prior to the date set for the hearing, REALTOR® A learned that REALTOR® B had practiced law before he entered the real estate business. REALTOR® A then decided that he would be at a disadvantage in presenting his case to the Hearing Panel without an attorney due to the legal background of REALTOR® B. REALTOR® A sent in an amended arbitration request in which he asked that he be awarded the commission and attorney’s fees and any other administrative expenses that he might incur in the presentation of his case before the Hearing Panel. The Chairperson accepted the amended complaint as part of the case and mailed REALTOR® B a copy.
The case was set and a hearing was held at which REALTOR® A appeared with his attorney and a court reporter. REALTOR® B acted as his own attorney. The Hearing Panel had the Board’s attorney and a Professional Standards Administrator with a tape recorder present. After giving both parties the opportunity to present their case, the Hearing Panel adjourned the hearing and went into executive session to reach a decision.
It was the opinion of the Hearing Panel that the arbitration process is provided to all REALTORS® and REALTOR-Associates® by the Board to avoid any unnecessary expenses. The hiring of an attorney was REALTOR® A’s own decision, not required by Article 17 of the Code of Ethics, the Hearing Panel, the Code of Ethics and Arbitration Manual, or the Board of REALTORS®. The Hearing Panel decided the commission dispute based strictly on the merits of the case presented. The Hearing Panel disallowed the request by REALTOR® A that he be awarded attorney’s fees or other administrative expenses.
Case #17-7 : REALTOR® Not Precluded from Filing Complaint with State Real Estate Regulatory Agency
(Revised Case #14-12 May, 1988. Transferred to Article 17 November, 1994. Revised May, 2002.)
REALTOR® A, a cooperating broker, filed a request for arbitration with REALTOR® B, the listing broker, in a dispute concerning entitlement to cooperative compensation in a real estate transaction. The complaint was referred to the Grievance Committee which concluded that a properly arbitrable matter existed and referred it to an arbitration hearing panel.
Shortly afterward REALTOR® B was notified that he was under investigation by the State Real Estate Commission for an alleged violation of the real estate regulations, based on a complaint filed by REALTOR® A.
REALTOR® B immediately filed an ethics complaint alleging violation of Article 17 by REALTOR® A for filing the complaint against REALTOR® B with the Commission. The complaint was referred to the Grievance Committee which concluded that since the ethics complaint and the arbitration request, while arising out of the same transaction, were clearly distinguishable the arbitration hearing should proceed as scheduled; and the ethics complaint should be dismissed, noting that while Article 17 requires REALTORS® to arbitrate contractual and specified non-contractual disputes, alleged violations of the Code and violations of law or regulations do not fall within its scope.
Case #17-8: Attempted Use of Corporate Veil to Avoid Obligation to Arbitrate
(Revised Case #14-14 April, 1992. Transferred to Article 17 November, 1994. Revised
November, 1995. Revised November, 2001.)
REALTORS® A and B, principals in different firms, were both members of the same Board. A disagreement arose between them concerning entitlement to a commission in a real estate transaction. After initial efforts to resolve the dispute proved fruitless, REALTOR® A filed a request for arbitration with the Board which was reviewed by the Grievance Committee which concluded that an arbitrable issue existed. Instead of agreeing to arbitration through the Board, REALTOR® B filed a lawsuit against REALTOR® A. Receiving notice of the suit, REALTOR® A filed a charge with the Board alleging REALTOR® B had violated Article 17 of the Code of Ethics.
REALTOR® B, in his presentation to the Board of Directors indicated that, in his opinion, he was not subject to any ethics charge, since it was his corporation, and not REALTOR® B individually, that had filed suit against the corporation of REALTOR® A, not against REALTOR® A himself.
REALTOR® A told the Board of Directors that immediately upon occurrence of the dispute, he had suggested to REALTOR® B that the matter be arbitrated by the Board, and REALTOR® B said he would think about it. REALTOR® A then proceeded to file his request for arbitration with the Board. However, REALTOR® B did not respond to the arbitration notice and, shortly thereafter, REALTOR® A received notice of the suit filed by REALTOR® B’s corporation against the corporation of REALTOR® A. He said he then called REALTOR® B and again discussed the obligation of Article 17 with him. However, REALTOR® B advised him that his corporation was not subject to the requirements of the Code and stated his intent to pursue the litigation.
REALTOR® B acknowledged that the facts as related by REALTOR® A were correct and that his corporation had filed suit upon the advice of the corporation’s legal counsel. REALTOR® B said that membership in a Board of REALTORS® is individual and that personal responsibility disappears when a matter of corporate business is involved. He pointed out that he was not the only principal or officer in his corporation and that the decision to file litigation was not made by him alone, but by all of the corporate officers.
The Board of Directors, in reaching its decision, did not agree with REALTOR® B’s position. The Directors’ noted that the membership requirement in a Board of REALTORS® has, as its purpose, the assurance of commitment by the principals in the firm to the Code of Ethics. This commitment addresses the conduct and activities of all persons affiliated with the REALTOR®’s firm whether a sole proprietorship, partnership, or corporation. Moreover, the Directors pointed out that Article 17 obligates REALTORS® to “. . . cause their firms to arbitrate and be bound by an award.”
REALTOR® B was advised to withdraw the litigation and submit to arbitration by a date certain or his membership in the Board would be terminated. REALTOR® B accepted the decision, withdrew the suit against REALTOR® A, and submitted to arbitration.
Case #17-9: REALTOR® Not to be Denied Arbitration
(Adopted Case #14-15 May, 1988. Transferred to Article 17 November, 1994. Deleted November, 2001.)
Case #17-10: Board’s Use of State Association Arbitration Panel
(Adopted Case #14-16 May, 1988. Transferred to Article 17 November, 1994.)
A dispute arose between REALTOR® A and REALTOR® B, two of the 15 members of the X Board of REALTORS®. Both members requested that the matter be arbitrated by the Board’s Professional Standards Committee. The Grievance Committee concluded that an arbitrable matter existed but expressed reservations about the Board’s ability to provide an objective and impartial hearing since most of the other Board Members were either employed by or affiliated with REALTOR® A or REALTOR® B, or were frequently involved in transactions with them.
At a specially called meeting of the Board of Directors, it was determined that the Board was incapable of providing an impartial panel for an arbitration hearing. The Board President was authorized to refer the request to the State Association for a hearing by a Hearing Panel of the State Association’s Professional Standards Committee.
Pursuant to the Board’s request, a Hearing Panel was convened by the State Association which rendered an award on behalf of REALTOR® A. REALTOR® B refused to abide by the decision on the grounds that the dispute had not been heard by a panel of his Board as required by Article 17.
Both the State Association and the local Board advised REALTOR® A to seek judicial enforcement of the award in a court of competent jurisdiction noting that REALTOR® B had participated in the arbitration; that the State Association is also charged with the responsibility for enforcing the Code of Ethics; that the Board was within its rights in referring the matter to the State Association, due to its inability to provide an impartial panel; and that representatives of the State Association and local Board would be available to appear in support of the request for judicial enforcement.
Case #17-11: Appeal of Grievance Committee Decision
(Adopted Case #14-17 May, 1988. Transferred to Article 17 November, 1994.)
REALTORS® A and B were partners in a building company. They both held membership in the XYZ Board of REALTORS® and were Participants in the Board’s Multiple Listing Service. After many successful years, they decided to terminate their partnership with REALTOR® A continuing the building business and REALTOR® B forming a new residential brokerage company. As part of their termination agreement, REALTOR® B agreed not to build new homes in the XYZ Board’s jurisdiction for a period of twelve months.
Six months later, REALTOR® A filed a written request for arbitration with the Professional Standards Administrator of the XYZ Board of REALTORS®. In his request, REALTOR® A outlined the terms of their partnership termination agreement pointing out that REALTOR® B had continued to build new homes in violation of their agreement. REALTOR® A demanded that the Board take action to enforce the agreement and compel REALTOR® B to refrain from any further construction.
The Professional Standards Administrator forwarded the arbitration request to the Grievance Committee for review. After review, the Grievance Committee found the matter not properly arbitrable.
REALTOR® A was upset with the Grievance Committee’s decision and appealed to the Board of Directors. The Board of Directors noted that Article 17 of the Code of Ethics requires arbitration of disputes “ . . . between REALTORS® associated with different firms arising out of their relationship as REALTORS®.”
If REALTOR® A were requesting arbitration of a dispute arising out of a real estate transaction (such as a dispute concerning entitlement to commissions or subagency compensation), this would be a properly arbitrable matter. However, the Directors noted that the dispute in question related to the provisions of a partnership termination agreement which the Board had no authority to enforce. The Directors advised that while the Board’s arbitration facilities were available to settle disputes between members, buyers, and sellers related to real estate transactions, the Board’s authority did not extend to ordering performance of contracts since this was properly the privilege of the courts.
Case 17-12: Arbitration when a REALTOR® acts Exclusively as a Principal in a Transaction
(Adopted November, 1995. Revised May, 2017.)
REALTOR® A, a residential specialist in a major metropolitan area, inherited a cabin in the North woods from a distant relative. After spending a week of vacation there with her family, REALTOR® A decided that the fact that the cabin was over five hundred miles from her home made it likely that her use of the cabin would be infrequent, at best. Consequently, she decided to list and sell the cabin. REALTOR® A described her situation to REALTOR® B, who claimed to be experienced in the sale of vacation properties in the area and who told REALTOR® A that a quick sale should be “no problem.” Based of the REALTOR® B’s assurances, REALTOR® A signed a listing agreement with REALTOR® B.
REALTOR® B showed the property several times over the following months but to no avail. REALTORS® A and B spoke by long distance several times and ultimately concluded that a significant reduction in the listed price was called for.
A month later, REALTOR® B called REALTOR® A and advised that she had received an offer but disclosed that the offer was from REALTOR® B’s daughter and son-in-law. REALTOR® A thanked REALTOR® B for disclosing her relationship to the purchasers but went on to indicate that, as she felt that REALTOR® B had been overly optimistic in recommending an asking price in the first place, and that even after a significant price reduction the only offer produced by REALTOR® B had been from a member of her family, and that it was an “in-house” sale, REALTOR® A thought it was only fair that REALTOR® B would reduce her commission. REALTOR® B disagreed and sent the purchase offer to REALTOR®
A. REALTOR® A accepted the offer but at the closing, which was handled in escrow, REALTOR® B was surprised to learn that REALTOR® A had instructed the closing officer to disburse to REALTOR® B only half of the commission called for in the listing contract. REALTOR® B filed an interboard arbitration request against REALTOR® A claiming the balance of her commission. REALTOR® A refused to arbitrate on the grounds that she had been the seller in the transaction and had not acted within the scope of her real estate license and that there had been no “relationship as REALTORS®” between her and REALTOR® B as referenced in Article 17 of the Code of Ethics. REALTOR® A’s refusal to arbitrate was referred to the Board of Directors of REALTOR® A’s primary Association and, in response to questions put to her, she repeated her claim that she had acted exclusively as a principal in the transaction and not as a real estate professional. The Directors concurred with her reasoning noting that the operant words in Article 17 refer to contractual disputes between REALTORS® in different firms “arising out of their relationship as REALTORS®.” They noted that if it had been the desire of REALTOR® A and B to bind themselves to resolve any contractual dispute that might arise out of their principal/agent relationship, that could have been accomplished through insertion of an appropriate arbitration clause in the listing agreement. Absent that, there was no obligation for REALTOR® A to arbitrate with REALTOR® B.
Case 17-13: Arbitration Involving a REALTOR® Selling her Own Property
(Adopted November, 1995. Revised May, 2017.)
REALTOR® B was a real estate broker and property manager who, in addition to managing property for others, frequently bought and sold income property for her own account. Needing capital for another project, REALTOR® B decided to sell a three-flat building in which she had a strong equity position and which she thought would move quickly, given the current market conditions. To maximize market exposure, she listed the property with her firm and entered the listing into the MLS. She put a sign in front of the property indicating that it was for sale “by owner.” Her ads in the local newspapers indicated that the seller was a “broker-owner.”
REALTOR® A, who lived near the building, saw the “for sale” sign and called REALTOR® B. Introducing himself as a broker and as a REALTOR®, REALTOR® A asked what the asking price was and whether REALTOR® B was interested in listing her property. REALTOR® B did not indicate that she had listed her own property nor did she disclose that she was a broker or a REALTOR®. She did indicate that she would pay a commission to REALTOR® A if he procured a purchaser for the property but added that she preferred not to enter into an exclusive relationship with any broker and didn’t want to put anything into writing.
REALTOR® A thought the property might interest Dr. X, REALTOR® A’s chiropractor, and contacted him. Dr. X was in fact interested and, after several visits to the property, made an offer to purchase which was subsequently accepted by REALTOR® B.
At the closing, REALTOR® A learned several things, among them, that REALTOR® B, the seller, was also a REALTOR® and, more importantly, that REALTOR® B had instructed that only half of the previously agreed on commission was to be disbursed to REALTOR® A. When REALTOR® A protested the shortfall, REALTOR® B responded that her property was highly desirable, had “practically sold itself,” and, in any event, REALTOR® A had expended minimal efforts in bringing about the quick sale. REALTOR® A disagreed with REALTOR® B’s reasoning and, after appeals to REALTOR® B’s sense of fairness went unheeded, filed an arbitration request with the Association of REALTORS®. Faced with the request to arbitrate, REALTOR® B declined, referring to Article 17 of the Code of Ethics and noting that it relates to disputes between REALTORS® “...arising out of their relationship as REALTORS® ...” whereas she had been the seller.
REALTOR® B’s refusal to arbitrate was referred to the Board of Directors for their consideration. REALTOR® B repeated her defense that, as the seller, she was not obligated to arbitrate a dispute with another REALTOR® who had been acting within the scope of his broker’s license absent a specific arbitration agreement. REALTOR® B pointed out that the agreement between them was oral and, in response to REALTOR® B’s question, REALTOR® A admitted that the question of arbitration had never even been discussed. REALTOR® A noted the property had appeared in the MLS, and REALTOR® B responded that inclusion of information in the MLS had been a “technicality” and that she had “listed with herself” merely to comply with MLS rules and that she had considered herself the seller, first and foremost. The Directors agreed with REALTOR® B that she obviously had been a principal in the sale of her own property but went on to conclude that by listing the property, albeit with herself, she no longer was exclusively a principal in the transaction but had also acted within the scope of her broker’s license. As such, she had become embroiled in a contractual dispute with another REALTOR® “...arising out of their relationship as REALTORS®...” and had become obligated to arbitrate.
Case 17-14: Arbitration in Non-Contractual Disputes
(Adopted November, 2022.)
REALTOR® A entered into an exclusive buyer representation agreement with a client (referred to herein as "Prospective Buyer"), showing her several homes over a period of time. The Prospective Buyer made offers on two homes with REALTOR® A, both of which were not accepted.
REALTOR® A then presented the Prospective Buyer with a property recently back on the market, listed by REALTOR® B. REALTOR® A and REALTOR® B were REALTOR® principals in different firms, and were both members of the same MLS. The Prospective Buyer told REALTOR® A that she had seen the property with REALTOR® C, a REALTOR® principal of a different firm, when it came on the market several weeks earlier. She also told REALTOR® A that she had written an offer on the property with REALTOR® C that was not accepted because of multiple offers being submitted.
The Prospective Buyer said she wanted to write a new offer on the property with REALTOR® A and did not want to go back to REALTOR® C since it had been a while and she wanted to start fresh with a different REALTOR®. REALTOR® A suggested that the Prospective Buyer could compensate REALTOR® A directly under the terms of the buyer representation agreement and REALTOR® A would reject the offer of compensation from the listing broker, REALTOR® B. The Prospective Buyer agreed, REALTOR® A rejected the offer of compensation from the listing broker and the offer was submitted. REALTOR® B agreed to reduce his compensation by the amount that was offered in MLS and rejected by REALTOR® A. The Seller accepted the Buyer's offer with the reduced compensation offered by REALTOR® B and the transaction closed.
REALTOR® C learned that the Buyer had purchased the property and believed that she was procuring cause of the sale based on previous work she had done with the Buyer and the offer she had previously written for her on the property. REALTOR® C was a REALTOR® principal in the same MLS as listing broker, REALTOR® B. REALTOR® C filed an arbitration request against the listing broker, REALTOR® B for the amount offered in MLS. After receiving the request, REALTOR® B then filed an arbitration request against REALTOR® A for the amount offered in MLS and requested that the two arbitration requests be consolidated into one hearing.
The Grievance Committee reviewed REALTOR® C's request and found it to be a contractual dispute under Article 17 in that REALTOR® C's claim was that she was the procuring cause of the sale and thus had accepted the offer of compensation made by REALTOR® B. The Grievance Committee also found that it was a mandatory arbitration under Article 17 for the amount requested.
In reviewing REALTOR® B's arbitration request against REALTOR® A, the Grievance Committee noted that there was no contractual dispute under Article 17 because REALTOR® A had rejected listing broker REALTOR® B's offer of compensation. However, the Grievance Committee found that REALTOR® B's request was a noncontractual dispute within Standard of Practice 17-4 (3) in that REALTOR® B filed the request against REALTOR® A as a third-party respondent. The request was found to be a mandatory arbitration matter for the amount requested.
The Grievance Committee also discussed that REALTOR® C could have filed an arbitration request directly against REALTOR® A as a noncontractual dispute under Standard of Practice 17-4 (3) for the amount offered in MLS. In its discussion, the Grievance Committee further noted that Standard of Practice 17-4 (3) does not include any limitation as to the amount received by the cooperating broker or paid by the seller as exists in Standard of Practice 17-4 (1) and (2).
Case 17-15: Arbitration in Non-Contractual Disputes
(Adopted November, 2022.)
REALTOR® A, a REALTOR® principal, worked with his client (referred to herein as "Buyer") on several properties. The Buyer wanted to write an offer on an expensive property that would generate (based on the offer price and the amount offered in the MLS) a $40,000 commission for REALTOR® A and his firm. When writing the offer, The Buyer explained that she wanted REALTOR® A to reduce his portion of the commission by half (by $20,000) to make the price of their offer attractive to the seller. REALTOR® A refused to reduce his commission as requested and the Buyer then refused to write the offer with REALTOR® A.
The Buyer then approached REALTOR® B to view the property again. The Buyer did not disclose that she had seen the property or attempted to write an offer on the property with REALTOR® A. When the Buyer asked to write the offer, she suggested that REALTOR® B reduce the compensation offered in MLS to $20,000 so that her offer price was more attractive to the seller. REALTOR® B presented the offer to the listing broker, REALTOR® C, and explained the reduced compensation. REALTOR® C presented the offer to the seller and agreed to reduce the total commission by $20,000. The seller accepted the offer and the transaction closed.
After learning that the Buyer had purchased the property through REALTOR® B, REALTOR® A filed an arbitration request against the listing broker, REALTOR® C for the amount offered in MLS, or $40,000. REALTOR® A's request stated that he was the procuring cause of sale and thus had accepted REALTOR® C's offer of compensation in the MLS. REALTOR® C then filed an arbitration request against REALTOR® B for $40,000, requesting that the two cases by consolidated for one hearing. REALTORS® A, B and C are each REALTOR® principals, are all associated with different firms, and are members of the same MLS.
After reviewing REALTOR® A's arbitration request against REALTOR® C, the Grievance Committee determined that the matter was a mandatory arbitration as a contractual dispute under Article 17 for the amount offered in MLS ($40,000) based on REALTOR® A's claim that he was the procuring cause of sale. Likewise, the Grievance Committee determined that REALTOR® C's request against REALTOR® B was also a mandatory arbitration as a contractual dispute under Article 17. However, since the alleged contractual matter between REALTOR® C and REALTOR® B was for an amount of $20,000, REALTOR® C's claim against REALTOR® B was limited to $20,000.
The Grievance Committee also discussed that REALTOR® A could have filed an arbitration request directly against REALTOR® B as a noncontractual dispute under Standard of Practice 17-4 (1) for the amount REALTOR® B received ($20,000) per the terms of Standard of Practice 17-4 (1) providing that ". . .the amount in dispute and the amount of any potential resulting award is limited to the amount paid to the respondent by the listing broker. . ."
Case 17-16: Arbitration in Non-Contractual Disputes
(Adopted November, 2022.)
REALTOR® C listed a property that was shown by REALTOR® A to REALTOR® A's client, referred to herein as "Prospective Buyer". REALTOR® C and REALTOR® A were REALTOR® principals in different firms. REALTOR® A was required to go out of town on a family emergency and had REALTOR® B in her firm take over for her, communicating that fact to the Prospective Buyer.
Prospective Buyer asked REALTOR® B to show the same listing to him again. REALTOR® B showed the listing to the Prospective Buyer. The Prospective Buyer did not like REALTOR® B's conduct during the showing. The Prospective Buyer wanted to write an offer on the property but did not want to write the offer with REALTOR® B and did not want to wait for REALTOR® A to return.
The Prospective Buyer then contacted REALTOR® D, an agent with a different firm who was recommended, to write an offer on the property, telling REALTOR® D that he had seen it with REALTORS® A and B, but would not work with REALTOR® B and could not wait for REALTOR® A to return.
REALTOR® D suggested writing an offer in which the Prospective Buyer agreed to pay REALTOR® D directly. The Prospective Buyer agreed on condition that REALTOR® D reduced her compensation by a certain percentage from what was offered in MLS. REALTOR® D agreed. REALTOR® D presented the offer, rejecting the offer of compensation in MLS. Listing broker REALTOR® C and the seller agreed to the compensation reduction. The offer was accepted, and the transaction closed.
REALTOR® A learned that the Buyer had purchased the Property through REALTOR® D. REALTOR® A filed an arbitration request against listing broker REALTOR® C for the amount offered in MLS. REALTOR® C then filed an arbitration request against REALTOR® D for the amount offered in MLS, requesting the cases to be consolidated into one hearing.
The Grievance Committee reviewed REALTOR® A's request and found it to be a contractual dispute under Article 17 in that REALTOR® A's calim was that she was the procuring cause of the sale and thus had accepted the offer of compensation made by REALTOR® C. The Grievance Committee also found that it was a mandatory arbitration under Article 17 for the amount requested.
In reviewing REALTOR® C's arbitration request against REALTOR® D, the Grievance Committee noted that there was no contractual dispute under Article 17 because REALTOR® D had rejected listing broker REALTOR® C's offer of compensation. However, the Grievance Committee found that REALTOR® C's request was a noncontractual dispute within Standard of Practice 17-4 (3) in that REALTOR® C filed the request against REALTOR® D as a third-party respondent. The request was found to be a mandatory arbitration for the amount requested.
The Grievance Committee also discussed that REALTOR® A could have filed an arbitration request directly against REALTOR® D as a noncontractual dispute under Standard of Practice17-4 (3) for the amount offered in MLS. In its discussion, the Grievance Committee further noted that Standard of Practice 17-4 (3) does not include any limitation as to the amount received by the cooperating broker or paid by the seller as exists in Standard of Practice 17-4 (1) and (2).