Legal Action Program News

Brief supports property owners against municipality’s arbitrary and motivated denial of project development.

July 9, 2024

The National Association of REALTORS®, in partnership with the New York State Association of REALTORS®, filed an amicus brief to the Supreme Court of the United States in support of a petition by New York property owners for writ of certiorari in Brinkmann v. Town of Southold. The property owners filed suit claiming the municipality’s exercise of eminent domain constituted an improper pretextual taking against private development in violation of the Fifth Amendment’s Takings Clause. 

After plaintiffs purchased the vacant property to construct a hardware store, applied for required permits, and paid a $30,000 impact study fee, the municipality enacted a moratorium on any new building permits centered on the main area of the subject property. Two years later, the municipality authorized acquisition of the property via eminent domain for purposes of building a ‘passive park’ with no significant land improvements or developments on the property. Plaintiffs alleged the exercise of the municipality’s eminent domain was pretextual for preventing their private development. 

The Second Circuit Court of Appeals affirmed the district court’s dismissal of the property owners’ lawsuit, holding that a government obtains a complete defense if the eminent domain project at issue bears a rational relationship to categories of public uses, including public, open spaces.

NAR and NYSAR’s brief, approved by the NAR Amicus Brief Advisory Board, argued a pretextual taking under the guise of eminent domain improperly expands the government’s power to interfere with the right to develop private land and will deter beneficial and affordable property development projects. The brief also explained the Second Circuit’s holding is an outlier among prior decisions in federal circuits and state courts rejecting governments’ exercise of eminent domain authority for pretextual and invalid reasons.

Cite: Brinkmann v. Town of Southold, New York, 96 F.4th (2d Cir. 2024).

Property owners allege New York’s Rent Stabilization Law illegally restricts owner reclamation and eviction efforts.

May 23, 2024

The National Association of REALTORS® filed an amicus brief in G-Max Management, Inc. v. New York, et al. in support of property owners who challenged New York City’s Housing Stability and Tenant Protection Act (“HSTPA”), a 2019 amendment to New York’s longstanding Rent Stabilization Law. 

The HSTPA restricts circumstances which owners can reclaim their properties for their own residential use, provides for perpetual lease renewals and significantly limits rent increases. In their petition for writ of certiorari, the property owners argued that the HSTPA has effected illegal takings in violation of the Constitution’s Fifth Amendment. They assert that the HSPTA illegally grants another person indefinite exclusive right to occupy their property, and that fails to provide grounds for which a landlord can terminate that are within their control. The filing of the petition comes after the case was dismissed by the Southern District of New York and affirmed by the Second Circuit. The Second Circuit held that the HSTPA’s reclamation regulations are not physical takings because lease termination by the landlord is still plausible. 

NAR’s amicus brief provided statistical evidence showing how rent control measures undermine the quantity and quality of affordable housing by disincentivizing investment, harming housing markets and shrinking supply. Further, NAR’s brief argued rent control forces property owners to bear public burdens which should be borne by the public as a whole and specifically harms “mom and pop” individual property owners who own nearly 75% of the nation’s rental properties.

Cite: Bldg. and Realty Inst. of Westchester and Putnam Ctys., Inc. v. New York (2d Cir. Mar. 12, 2024).

Funding mechanism deemed constitutional therefore rules enacted by CFPB remain intact to protect consumer access and protection in housing financing.

May 16, 2024

In Consumer Financial Services Association of America et al. v. Consumer Financial Protection Bureau, Limited (“CFPB”), et al., the Supreme Court of the United States reversed the Fifth Circuit Court of Appeals in a 7-2 decision by holding the CFPB’s funding mechanism satisfies the U.S. Constitution’s Appropriations Clause. 

In their lawsuit, Plaintiffs argued the CFPB’s funding method violated the U.S. Constitution because the Bureau receives funding directly from the Federal Reserve by requesting an amount, as determined by the Bureau’s Director, that is reasonably necessary to carry out the Bureau’s functions. Initially dismissed by the district court, the Fifth Circuit Court of Appeals reversed by reasoning the funding, conducted through bank assessments, provided “double insulation” from Congressional appropriations that was unprecedented across the government. 

In a majority opinion authored by Justice Thomas, the Court reversed the Fifth Circuit and upheld CFPB’s funding authorization under the Constitution’s Appropriations Clause because an appropriation is “simply a law that authorizes expenditures from a specified source of public money for designated purposes.”

Because the case potentially threatened to call into question the CFPB’s past rulemaking and actions, NAR’s Amicus Brief Advisory Board approved the filing of an amicus brief to the Supreme Court advocating for stability in the industry in the event the Court deemed the funding mechanism as unconstitutional. The brief, filed jointly with the Mortgage Bankers Association and the National Association of Home Builders, argued for de facto validity to CFPB rules which include the TILA-RESPA Integrated Disclosure rule, Ability-to-Repay rule, and the Qualified Mortgage rule.

Cite: Consumer Fin. Protec. Bureau v. Community Fin. Services Assn. of Am., Ltd., No. 22-448 (U.S. May 16, 2024)

Class action suit against New Jersey brokerage dismissed based on statutory interpretation of New Jersey Real Estate License Act

May 13, 2024

In Kennedy v. Weichert Co., the New Jersey Supreme Court unanimously held that agreements classifying real estate professionals as independent contractors is the dispositive factor of a salesperson’s classification status under New Jersey’s Brokers Act. Relying heavily on the legislative intent of a 2018 amendment to the Brokers Act authorizing independent contractor business relationships between brokers and salespersons, the court’s ruling effectively dismissed Plaintiff’s misclassification class action suit against the Weichert brokerage. 

In 2019, Plaintiff filed a class action suit, alleging that Weichert violated New Jersey’s Wage Payment Law by misclassifying him and other real estate salespersons as independent contractors and unlawfully deducting marketing fees and other expenses from their commissions. 

The case’s history coincides with amendments passed by the New Jersey Legislature to the Brokers Act. After the New Jersey Supreme Court adopted the ABC Test in 2015 as the governing standard for classification disputes under New Jersey’s Wage Payment Law, the Legislature amended the Brokers Act in 2018 to clarify that the ABC Test does not apply to real estate salespersons, notwithstanding any other law, rule or regulation to the contrary, provided the relationship is defined via written agreement.

After the trial court denied Weichert’s motion to dismiss, the Appellate Court affirmed the ruling by declining to apply the 2018 amendment retroactively. During the pendency of Weichert’s appeal to the New Jersey Supreme Court, in 2022 the legislature again amended the Brokers Act to clarify the 2018 amendment’s retroactive applicability to agreements made before the 2018 amendment.

Following remand where the Appellate Court held that a written agreement between a broker and salesperson was a relevant but not dispositive factor in a classification status determination under the Wage Payment Law, the New Jersey Supreme Court granted review. The court’s unanimous ruling specifically pointed to the 2018 amendment’s language indicating that if an agreement between salespersons and brokerages conflict with another law, the agreement shall prevail.

The decision reflects the significant advocacy efforts of the New Jersey REALTORS® and support from NAR’s Legal Action Program. The New Jersey REALTORS® filed amicus briefs supportive of the Weichert brokerage and also advocated for the passage of the 2018 and 2022 amendments to clarify the classification status of real estate salespersons. NAR’s Legal Action Committee additionally provided support to Weichert since the case’s inception in 2019.

Read the Kennedy v. Weichert Co., No. 087975 (N.J. May 13, 2024) syllabus

Entries by wildlife enforcement agency violated Tennessee Constitution’s unreasonable search and seizure provision.

May 9, 2024

The Tennessee Court of Appeals held a statute authorizing warrantless entry of property by the Tennessee Wildlife Resource Agency (TWRA) as unconstitutional, affirming a lower court’s determination that the statute violated Article 1 Section 7 of the Tennessee Constitution’s privacy protections against unreasonable searches and seizures of property. 

Two large tract property owners challenged the constitutionality of the statute after TWRA officers entered plaintiffs’ land on numerous occasions and placed cameras on trees. Plaintiffs’ properties, used for recreational activities, were secured by gates and signs indicating “No Trespassing” and only accessible by private drives. After the Benton County Circuit Court declared the entry authorization statute unconstitutional, TWRA appealed, arguing open tracts of property were not protected by Article 1, Section 7 of the Tennessee Constitution’s protections against unreasonable searches of “possessions,” a term defined in previous cases as encompassing a person’s real property. 

The Court of Appeals described the statute at issue as contrary to American foundations of search protections against arbitrary entries upon privacy and personal liberty. Also following precedential Tennessee cases protecting land outside the home and curtilage if actually occupied, the Court of Appeals held that discretionary searches by TWRA officers upon land with evidence of occupation were unreasonable and therefore the statute was deemed unconstitutional as applied. The Court of Appeals overturned the circuit court’s holding that the statute is facially unconstitutional, holding that entries made upon “wild waste lands” with no occupation would be permitted.

NAR filed an amicus brief to the Tennessee Court of Appeals joined by the Tennessee Association of REALTORS® and the REALTORS® Land Institute. Approved by NAR’s Amicus Brief Advisory Board, NAR’s brief advocated for the preservation of privacy rights against entries without warrant or probable cause.

The Tennessee Wildlife Resource Agency declined to petition the Tennessee Supreme Court for review of the Court of Appeals decision, and on July 12, 2024 the Tennessee Administrative Office of the Courts considered the matter closed.

Cite: Rainwaters v. Tennessee Wildlife Resources Agency, No. W2022-00514-COA-R3-CV (Tenn. App. May 9, 2024).

Previous commission award overturned based solely on failure to follow controlling statutes requiring written agency agreement.

May 1, 2024

The Supreme Court of South Carolina vacated an arbitration panel’s commission award, holding that the arbitration panel manifestly disregarded controlling statutes requiring written agency agreements. The initial $250,000 arbitration award, decided in 2016 pursuant to the South Carolina Association of REALTORS® (SCAR) arbitration proceedings, involved procuring cause arguments raised in the absence of a written representation agreement connected with commercial transactions. 

After the Court of Appeals reinstated the award based on oral and implied agency legal theories, petitioners sought review arguing the arbitration panel ignored superseding South Carolina statutory requirements of written representation agreements; and that SCAR’s governing procedures unfairly prejudiced petitioners by limiting a comprehensive judicial review. The Supreme Court of South Carolina agreed with petitioners, holding that the statutory insistence of written agency agreements removed the award’s legal basis in the absence of a written agreement. In its opinion, the Supreme Court did not address petitioners’ arguments raised against SCAR’s governing procedures for adjudicating disputes. 

Supported by NAR’s Amicus Brief Advisory Board, NAR filed an amicus brief advocating in support of SCAR’s voluntary contractual arbitration procedures and against petitioner’s legal grounds for vacating the award. Acknowledging the narrow justifications for overturning arbitration awards, the court based its decision to vacate the award solely on the statutory legal requirements for written agency agreements enacted in 2004 that effectively superseded prior South Carolina decisions awarding commissions under theories of oral and implied agency.

Cite: Waldo v. Cousins, 901 S.E.2d 276 (S.C. 2024).

Narrow opinion vacates Fifth Circuit dismissal and permits lawsuit against Texas under state law.

April 16, 2024

In Devillier v. Texas, the Supreme Court of the United States unanimously vacated a Fifth Circuit Court of Appeals ruling that previously dismissed an unconstitutional takings lawsuit brought against the State of Texas by a group of property owners. 

In 2020, several property owners sued Texas after maintenance projects on Interstate 10 diverted rainwater causing widespread property damage. In 2023, the Fifth Circuit held property owners cannot bring federal takings claims under the Fifth Amendment’s takings clause because 42 U.S.C. 1983, the federal statute providing a remedy against a person who deprives rights secured by the Constitution, does not apply to a state defendant. 

The Plaintiffs filed a petition for writ of certiorari to the Supreme Court, arguing the “just compensation” language of the Fifth Amendment's Takings Clause creates a self-executing substantive right to pursue a remedy when the government takes private property. With approval from NAR’s Amicus Brief Advisory Board, NAR filed an amicus brief with the Supreme Court arguing in support of the property owners that the Fifth Amendment’s language along with supporting historical precedents required Court intervention to provide property owner litigants with the ability to seek takings remedies in court against a state.

The Supreme Court vacated the previous dismissal and remanded to Texas state court. While the Court did not address whether the Takings Clause provides a direct cause of action for just compensation, it held that Texas law provided a cause of action to assert takings claims. Therefore, it was deemed ‘imprudent’ to decide whether a plaintiff has a cause of action against a state arising directly under the Takings Clause.

NAR’s amicus brief was joined by the American Property Owners Alliance and the Texas REALTORS®.

Cite: DeVillier v. Texas, 601 U.S. 285 (2024).

Court holds legislative-based impact fees are subject to heightened analysis framework.

April 12, 2024

In Sheetz v. County of El Dorado, a California property owner has challenged the constitutionality of a municipality’s legislatively imposed traffic impact fee required for obtaining a residential building permit. On April 12, 2024, the Supreme Court of the United States unanimously held that conditions imposed on development permits are subject to the heightened Nollan-Dolan takings test established under the unconstitutional conditions doctrine. 

The imposed traffic impact fee of $23,420 required for a single-family building permit was calculated by the County of El Dorado based on the project’s location and type, not in consideration of the actual impact on local roads. The Nollan-Dolan test prohibits the government from conditioning land use permits on a conveyance of property or money unless there is (1) an essential nexus between the government’s interests and the land use exaction; and (2) a rough proportionality between the fee and projected impact of the proposed development. This standard recognizes a municipality’s interest in mitigating a development’s public effects and how the permitting process allows the government to take unreasonable advantage over property owners seeking permits. 

The Supreme Court granted review of Sheetz’s case after a California state court held the Nollan-Dolan standard applies only to individualized development fees assessed by administrators and doesn’t apply to legislatively prescribed fees generally applicable to a broad class of property owners. In a unanimous decision, the Court held that legislatively-prescribed land use exactions are not exempt from Nollan-Dolan scrutiny, noting that nothing in Constitutional text, history, or precedent exempts legislatures from ordinary takings rules.

The Court remanded the case to California state court to consider whether permit conditions imposed legislatively on a class of properties must be tailored with similar specificity as permit conditions imposed on individual properties.

With approval of NAR’s Amicus Brief Advisory Board, NAR filed an amicus brief arguing in favor of heightened scrutiny for legislatively imposed impact fees and explaining how impact fees improperly increase development and real estate costs. The American Property Owners Alliance, the REALTORS® Land Institute, California Association of REALTORS® and Californians for Homeownership joined NAR’s brief.

Cite: Sheetz v. Cnty. of El Dorado, California, 601 U.S. 267 (2024).

NAR argues independently created floorplans of homes exempted from copyright infringement.

March 4, 2024

NAR filed an amicus brief in Kipp Flores Architects, LLC v. AMH Creekside Development, a copyright infringement case currently before the Fifth Circuit Court of Appeals involving the use of floorplans in home marketing materials. The architecture firm sued multiple defendants alleging copyright infringement of their home designs by the developer’s use of floorplans and three-dimensional renderings in marketing materials of a Texas housing development. 

In 2022, the District Court for the Western District of Texas dismissed the architecture firm’s copyright infringement claims. The court held that floorplans of homes are pictorial representations exempt from infringement claims based on Section 120(a) of the Copyright Act’s exemption of “pictures, paintings, photographs, or other pictorial representations” of an architectural work. The district court expressly disagreed with the Eighth Circuit in Designworks Homes, Inc. v. Columbia House of Brokers Realty, a 2021 decision that held floorplans do not fall within Section 120(a)’s exempted categories based on their technical nature and lack of artistic expression. 

In Kipp Flores’ appeal to the Fifth Circuit, the architecture firm argued the court should follow the Designworks precedent and reverse the district court’s holding. NAR’s “friend of the court” brief, filed in partnership with the Texas REALTORS® and approved by NAR’s Amicus Brief Advisory Board, focused on the widespread negative effects to property rights and the real estate industry if the creation, display or distribution of home floorplans was not exempt from infringement claims. The brief explained how floorplans are critical to a buyer’s informed decision-making process, securing financing, the appraisal process, and for renovation permitting. Additionally, the brief outlined how Congress intended the Copyright Act Section 120(a)’s definition of “picture” or “pictorial representation” to include “architectural plans;” therefore the Fifth Circuit should follow the district court’s legal interpretation and holding. The Fifth Circuit’s decision is expected during the second half of 2024.

Cite: Kipp Flores Architects, LLC v. AMH Creekside Dev., LLC, No. 23-50750 (5th Cir. 2023)

Property owners argued New York’s rent stabilization laws cause illegal physical and regulatory takings.

February 20, 2024

The Supreme Court of the United States denied petitions for writs of certiorari in two parallel cases, declining to review whether New York’s Rent Stabilization Laws (“RSL”) constitute physical and regulatory takings in violation of the Fifth Amendment. 

Amended in 2019, New York’s RSL includes provisions limiting rent increases, limitations to eviction rights, requirements to unilaterally renew leases and requirements of forced successor tenancy, among other regulations. Plaintiffs’ petitions argued the RSL’s mandates affect an illegal physical occupation of property and improperly impose a public burden on a select group that should be borne by the public as a whole. 

NAR’s Legal Action Committee provided direct financial support to Plaintiffs in 2019, and NAR’s Amicus Brief Advisory Board approved NAR’s participation as amicus in support of Plaintiffs’ petitions for writ. Filed in collaboration with the National Apartment Association, National Association of Home Builders and the Mortgage Bankers Association, the brief urged the Court to accept the cases and emphasized that rent stabilization laws only serve to exacerbate the ongoing housing supply and affordability crisis, with a specific focus on the negative impacts affecting New York’s regulated property owners. In a statement published by Justice Thomas on February 20, 2024, the Court remarked how the constitutionality of New York’s RSL is an important and pressing question that should be addressed in a future case, but the petitioner’s pleadings contained generalized allegations that would complicate the Court’s review.

Read the Community Housing Improvement Program v. New York, et al.; 74 Pinehurst LLC v. New York, et al.; Docket Nos. 22-1095, 22-1130 (U.S.) brief

Coalition argues WOTUS Rule is impermissibly vague, inconsistent with Supreme Court precedent and in violation of the Clean Water Act.

February 2, 2024

The National Association of REALTORS®, as member of a nationwide coalition of eighteen industrial organizations, filed a motion for summary judgment in a Texas federal court, seeking a judicial declaration that the Environmental Protection Agency’s and Army Corps of Engineers’ (“Agencies”) 2023 Rule defining the “Waters of the United States” (“WOTUS”) violates the Administrative Procedure Act, Clean Water Act, and the U.S. Constitution. 

The coalition’s motion argues the 2023 Rule contradicts the recent U.S. Supreme Court decision in Sackett v. EPA and impermissibly fails to provide the regulated community with clarity as to which geographical features fall under the Agencies’ federal jurisdiction. The Clean Water Act imposes severe civil and criminal penalties, and the 2023 Rule’s vagueness will lead to inconsistent application for landowners at the Agencies’ arbitrary and broad discretion. The motion asks the court to remand the 2023 Rule back to the Agencies for a substantial redefinition of WOTUS consistent with federal law and Supreme Court precedent.

In a parallel lawsuit challenging the 2023 Rule in a North Dakota federal court, twenty-four states and a coalition of industry affiliates filed similar motions for summary judgment on February 26, 2024. The South Carolina REALTORS® and REALTORS® Land Institute intervened as plaintiffs in the North Dakota lawsuit. In 2023, both the Texas and North Dakota courts entered preliminary injunctions enjoining enforcement of the Rule in twenty-six states. Briefing in both cases will continue throughout the spring months, with decisions expected later in 2024.

Read the MSJ Filed in the District Court for the Southern District of Texas

NAR argues legislative-based fees must comply with unconstitutional conditions doctrine.

November 20, 2023

NAR filed an amicus brief with the Supreme Court of the United States in support of Plaintiff in the case Sheetz v. County of El Dorado, California. The Plaintiff challenges a $23,420 traffic impact fee required for a single-family residence building permit as unconstitutional under the Takings Clause of the U.S. Constitution and the unconstitutional conditions doctrine. 

The challenged traffic impact fee, calculated based on the property’s location and project type, was assessed in accordance with 2006 legislation adopted by the County of El Dorado, California.  Plaintiff asserts the fee’s calculation did not consider the project’s actual impact on state and local roads in violation of the unconstitutional conditions doctrine, which generally prohibits the government from denying a benefit on a basis that infringes a constitutionally protected interest. In a takings context, the doctrine prohibits the government from conditioning a land use permit’s approval on the conveyance of real property or money unless imposed in accordance with the U.S. Supreme Court’s Nollan-Dolan standard. Impact fees may be imposed if there is (1) an essential nexus between the government’s legitimate state interest and the impact fee; and (2) a rough proportionality between the impact fee and the projected impact of the proposed development. 

California state courts have found that legislatively prescribed land use exactions are not subject to the unconstitutional conditions doctrine and the Nollan-Dolan standard. After Plaintiff’s petition for review to the California Supreme Court was denied, Plaintiff subsequently filed a petition for writ of certiorari to the U.S. Supreme Court, which was granted.  NAR’s brief, joined by the American Property Owners Alliance, the REALTORS® Land Institute, California Association of REALTORS® and Californians for Homeownership argues legislative impact fees not only improperly increase development and real estate costs but should be subject to constitutional scrutiny under the Nollan-Dolan standard.

Read the Sheetz v. County of El Dorado amicus brief

NAR supports homeowners in suit arguing Takings Clause provides self-executing remedy against illegal takings.

November 20, 2023

NAR reinforced its support of property owners against unconstitutional takings by filing an amicus brief in Devillier et al. v. Texas, which was accepted for review by the Supreme Court of the United States. Plaintiffs seek reversal of a Fifth Circuit Court of Appeals catch-22 decision that would prohibit property owners from bringing takings claims against states absent a remedy-providing federal statute. Plaintiffs and NAR both argue the Takings Clause’s “just compensation” language provides a self-executing judicially enforceable right to bring suit against a state in federal court. 

In May of 2020, several Texas property owners sued Texas in state court claiming unconstitutional takings violations after maintenance projects on Interstate 10 altered the flow of rainwater causing significant property damage. Although the Eleventh Amendment protects states from federal suits, Texas waived its immunity and removed the case to federal court.  Upon removal, Texas argued for dismissal on the basis that claims against states under the Fifth Amendment can only be brought under 42 U.S.C. 1983, the federal statute providing a remedy against a person who deprives rights secured by the Constitution.  Because a state is not a “person” under §1983, Texas argued Plaintiffs takings claims should be dismissed.

The District Court for the Southern District of Texas did not dismiss, but on appeal and despite contrary precedent, the Fifth Circuit held that a property owner cannot bring a takings case against a state because the authorizing statute does not apply when a state is a defendant.  Plaintiffs petitioned the Supreme Court for a writ of certiorari, which the Court granted. NAR’s amicus brief, joined by the American Property Owners Alliance and the Texas REALTORS®, argued the Fifth Amendment’s “just compensation” language combined with longstanding supporting precedents requires reversal to ensure that property owners may seek a takings remedy in court against a state.

Read the Devillier v. Texas amicus brief

Legal issues include the calculation of licensure fees for brokers and whether an accommodation request constitutes an undue financial burden.  

November 15, 2023

The Legal Action Committee voted to recommend, and the NAR Board of Directors approved, funding in two cases during its meeting at the 2023 NAR NXT Meetings in Anaheim, CA. 

1. The South Carolina REALTORS® were granted $10,000 for costs associated with its pending South Carolina lawsuit, Greenville Central Partners, LLC, d/b/a/ Keller Williams Greenville Central and South Carolina Association of REALTORS® v. City of Mauldin and the Municipal Association of South Carolina, which challenges the City of Mauldin’s (“City”) calculation of the business license tax owed by a Broker-in-Charge.  Under South Carolina’s Business License Tax Standardization Act, the business license fee is calculated for Brokers-in-Charge based on “gross income for agents” which excludes amounts divided with other brokers or agents. The City rejected the South Carolina REALTORS® and co-Plaintiff Keller Williams Greenville Central’s calculation of gross income that excluded commissions paid to affiliated licensees, arguing the statute’s purported purpose was to prevent double taxation.  The case is currently pending before South Carolina’s Administrative Law Court.
2. Three Defendants (Priority Home Solutions LLC, Hylton & Company LLC, and LeQuan Hylton) were granted $25,000 for costs associated with Commonwealth of Virginia Real Estate Board v. Priority Home Solutions, LLC currently pending in Virginia state court.  In this housing discrimination case, Defendants claim their denial of an assistance animal accommodation was not discriminatory because the accommodation imposed an undue financial burden based on increased insurance costs as communicated from the housing provider’s insurance broker.  The Virginia Fair Housing Law allows landlords to deny reasonable requests if the accommodation imposes an undue financial burden by weighing factors including the accommodation’s cost, the housing provider’s financial resources, the accommodation’s potential benefits, and the availability of alternatives. This case has the potential to set precedential standards for housing providers in Virginia relating to disability accommodation requests and what constitutes an undue financial burden.

Updated pleading filed in response to federal agencies’ WOTUS amended Rule published September 8, 2023.  

November 13, 2023

NAR, as part of a large coalition of industry organizations, filed an amended complaint on November 13, 2023 in the U.S. District Court for the Southern District of Texas to invalidate the Environmental Protection Agency’s and Army Corps of Engineers’ (“Agencies”) amended 2023 Rule defining the “waters of the United States” (“WOTUS”) under the Clean Water Act, which demarcates federal regulatory jurisdiction. The Coalition initially filed suit on January 18, 2023 following implementation of the initial 2023 Rule and is also involved in a parallel lawsuit filed in the U.S. District Court for the District of North Dakota.

In July, the Agencies were granted a litigation stay to publish an amendment to the 2023 Rule following the U.S. Supreme Court’s published decision in Sackett v. EPA. The Sackett decision rejected the “significant nexus test” and other jurisdiction-expanding elements also included in the 2023 Rule.  The Agencies published an amended 2023 Rule on September 8, 2023.  The Coalition’s amended complaint argues the Agencies’ amendment fails to fully address the Sackett ruling and still sets forth a vague and unworkable WOTUS definition in conflict with the Clean Water Act, the U.S. Constitution and Supreme Court precedent. The Coalition, aiming for clarity in implementation for the regulated community and compliance with federal statutes, seeks an order declaring the 2023 Rule as unlawful requiring the Agencies to promulgate a clear, compliant and lawful WOTUS Rule. 

On October 23, 2023, the Coalition’s efforts to intervene as Plaintiffs were denied in the parallel North Dakota WOTUS lawsuit because the Coalition’s interests are adequately protected as parties in the Texas litigation.  The court held that the Coalition organizations have standing, therefore affiliates of the Coalition moved the court to intervene as Plaintiffs on November 20, 2023. The South Carolina REALTORS® and the REALTORS® Land Institute joined nine other Coalition affiliates in filing motions to intervene as Plaintiffs. On December 12, 2023, the U.S. District Court for the District of North Dakota granted the affiliates motion to intervene as Plaintiffs, and the Coalition affiliates filed their Complaint the same day.  

Brokers’ use of floorplans in marketing materials deemed fair use of copyrighted architectural works.

September 28, 2023

A Missouri federal court granted summary judgment in favor of two defendant brokerages sued for copyright infringement by an architect over the brokers’ use of house floorplans in marketing materials. The architect alleged in two parallel lawsuits that the floorplans infringed the copyright in the home’s original design.  The court found the independently created floorplans constituted fair use of the copyrighted architectural design and therefore the brokerages did not infringe the copyright.

The fair use doctrine is an affirmative defense to claims of copyright infringement which permits the use of copyrighted material in a reasonable manner without the owner’s consent. The applicability of the fair use doctrine hinges on the balancing of four factors: (1) the character of use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect on the potential market value of the copyrighted work.

The court found all four factors supported a finding of fair use. The floorplans were used to provide information to potential homebuyers as opposed to reducing the architectural design’s marketability. The design of residential structures included many common structural elements, therefore the design’s nature outweighed any broader protections granted for artistic expression, favoring a finding of fair use. Further, the floorplan’s creation arose solely from accessing the structure’s interior, therefore the copying was minimal and insubstantial when compared with the scope of the design’s architectural plans.  The court also highlighted the policy benefits associated with transparency in real estate transactions and how the floorplans do not replace the architectural expertise required to replicate the design.   

These cases were originally dismissed pursuant to Section 120(a) of the Copyright Act’s exemption to copyright protection for “pictures, paintings, photographs or other pictorial representations” of architectural structures.  The dismissal was reversed and remanded by the Eighth Circuit Court of Appeals which reasoned that floorplans did not apply to Section 120(a)’s exemption based on their technical nature and that they cannot be reconstructed by publicly viewing the structure. On remand, the district court determined the published floorplans were fair use. On October 27, 2023, Plaintiff filed notice of their intent to appeal the fair use ruling to the Eight Circuit.  NAR’s Legal Action Program has provided direct funding and amicus support to the brokerages since 2018. 

Cites: Designworks Homes, Inc. v. Columbia H. of Brokers Realty, Inc., No. 2:18-CV-04090-BCW, 2023 WL 7278744 (W.D. Mo. Sept. 29, 2023); and Designworks Homes, Inc. v. Horak, et al., No. 2:18-CV-04093-BCW (W.D. Mo. Sept. 28, 2023).

Large tract owners were subject to illegal entries by wildlife enforcement agency

June 20, 2023

Oral arguments were held at the Tennessee Court of Appeals in Rainwaters v. Tennessee Wildlife Resource Agency, a case challenging the constitutionality of a Tennessee statute authorizing the Tennessee Wildlife Resource Agency (TWRA) to enter any property without a warrant or probable cause to search for potential hunting and fishing violations.

Plaintiffs, large tract landowners who were subject to warrantless entries, filed suit against TWRA alleging the intrusions violated Article I, Section 7 of Tennessee’s Constitution. TWRA officers entered Plaintiffs’ land on several occasions, and one Plaintiff found a camera affixed to a tree capturing images of the property, including the exterior of a tenant’s home.  The Circuit Court ruled in favor of Plaintiffs and declared the statute facially unconstitutional, unlawful, and unenforceable.  Defendant TWRA appealed, arguing that large open tracts of property are not constitutionally protected and that the TWRA’s entries were reasonable. 

Article I, Section 7 of Tennessee’s Constitution provides that people shall be secure in their persons, houses, papers, and possessions from unreasonable searches and seizures. In partnership with the Tennessee Association of REALTORS® and the REALTORS® Land Institute, NAR filed an amicus brief in support of Plaintiffs advocating for the preservation of property rights, and focused on precedent case law supporting Article I, Section 7’s protection of “possessions” as encompassing all of a person’s real property, including large open tracts of land.  Such language included in several state constitutions is thought to offer more protection than the federal open fields doctrine’s protection of only the home and curtilage under the 4th Amendment. 

Cite: Rainwaters v. Tennessee Wildlife Resources Agency, 20-CV-6, 2022 WL 17491794 (Tenn. Cir. Mar. 22, 2022)

Property owners allege New York’s Rent Stabilization Law an Unconstitutional Taking

June 9, 2023

NAR filed amicus briefs with the Supreme Court of the United States in support of Plaintiffs in the cases, Community Housing Improvement Program (CHIP) v. New York, et al. and Pinehurst LLC v. New York. The cases claim that the recent amendments to New York City’s Rent Stabilization Laws effected physical and regulatory takings in violation of the Fifth Amendment's Takings Clause.

New York’s rent stabilization regime, recently amended in 2019, imposes regulations such as limitations on rent increases, requires renewal offers in some cases, and limits the ability to evict tenants. 

The cases are both petitioning the US Supreme Court for writ of certiorari on appeal from the Second Circuit Court of Appeals, which held that the rent stabilization amendments did not constitute a physical taking because landlords invite tenants onto the property and should expect regulation in property rentals. In reasoning that the rent stabilization regime did not constitute a regulatory taking, the Second Circuit applied the Penn Central factors test and found that not every owner suffered an adverse economic impact; the owners’ investment expectations in their properties were not interfered by the amendments, and the laws serve important public interests. 

Joined by the National Apartment Association, National Association of Home Builders and Mortgage Bankers Association, NAR’s brief argues the cases deserve review because of recent nationwide trends of municipalities conscripting property owners to provide public relief through rent control measures without compensation, and that rent control measures undermine housing affordability by negatively impacting the quality and quantity of affordable housing.

The National Association of REALTORS® Legal Action Committee has supported Plaintiff CHIP since 2019 with both funding and amicus participation. NAR’s Amicus Brief Advisory Board also approved NAR’s amicus participation in support of the plaintiffs in 74 Pinehurst LLC v. State of New York, a parallel case with identical issues.

Cite: Community Housing Improvement Program v. New York, et al.; 74 Pinehurst LLC v. New York, et al.; Docket Nos. 22-1095, 22-1130 (U.S.)

May 25, 2023

Court holds the Plaintiff asserted a “classic takings” Under Fifth Amendment and is entitled to just compensation.

The U.S. Supreme Court reversed the dismissal of a Minnesota homeowner’s constitutional challenge of a state statutory scheme that allows municipalities to seize a tax debtor’s property and retain the surplus from the sale as a windfall in excess of the debt owed. The National Association of REALTORS® filed an amicus brief in support of plaintiff Geraldine Tyler, a 94-year old Minnesota homeowner, who incurred a $15,000 tax debt after moving into an assisted living facility. Proceeding under Minnesota’s forfeiture procedures, Hennepin County took absolute title to Ms. Tyler’s condo, sold the property for $40,000 and retained the full net proceeds for government disbursement.

Ms. Tyler asserts Hennepin County unconstitutionally retained the excess value of her home above her tax debt in violation of the Fifth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause. The District Court dismissed the case, and the Eighth Circuit affirmed, holding that no illegal taking occurred because Ms. Tyler did not own a valid property interest in the subject property at the time of the sale. In a unanimous decision, the Supreme Court reversed the Eighth Circuit’s ruling and declared that using a tax debt to confiscate more property than was due effectuated a “classic taking”, and thus Ms. Tyler is entitled to just compensation.

NAR’s Legal Action Program supported the Plaintiff in this case through the filing of an amicus brief with the Supreme Court, which was joined by the Minnesota of REALTORS® and the American Property Alliance, and argued that the Court’s analysis should focus on how the statutory scheme permitted the government to take absolute title and retain the full proceeds, instead of the property’s ownership status at the time of the sale in determining a violation of the US Constitution.

Cite: Tyler v. Hennepin Cnty., Minnesota, No. 22-166, 2023 WL 3632754 (U.S. May 25, 2023).

May 15, 2023

NAR calls on Court to conduct severability analysis in determining constitutionality of CFPB funding mechanism and urges the Court to allow the remainder of the Consumer Financial Protection Act to remain intact to protect consumers access and protections in housing financing.

NAR filed an amicus brief with the United States Supreme Court in Consumer Financial Services Association of America et al. v. Consumer Financial Protection Bureau, Limited, et al., a case in which plaintiff Consumer Financial Services Association of America (“CFSA”) challenges both the validity of the Payday Lending Rule’s promulgation and the Consumer Financial Protection Bureau’s (“CFPB”) funding mechanism. The district court rejected CFSA’s claims, but on appeal, the Fifth Circuit struck down the Payday Lending Rule, holding that the CFPB’s funding mechanism violates the appropriations clause of the Constitution. A decision from the Supreme Court upholding the Fifth Circuit’s decision could potentially invalidate all CFPB regulations since the CFPB’s inception.

NAR’s brief, filed jointly with the Mortgage Bankers Association and the National Association of Homebuilders, did not address the constitutionality of the CFPB’s funding mechanism. Instead, the brief argued that if the Court finds the CFPB’s funding mechanism to be unconstitutional, the Court should sever the problematic provisions of the Consumer Financial Protection Act in order to maintain stability and certainty for the real estate industry and consumers. Severability will preserve the CFPB’s pro-consumer rules, which serve critical purposes such as ensuring consumers are informed of inherently complicated contractual information. The brief also argued the CFPB’s past rulemaking activities should remain valid until Congress can determine a valid funding mechanism. Providing “de facto validity” would ensure the CFPB’s past acts are not litigated under the unconstitutional provisions and allow Congress the opportunity to mend the funding mechanism, protecting the regulatory structure and consumer protections of the current housing financing system.

Cite: Cmty. Fin. Servs. Ass'n of Am., Ltd. v. Consumer Fin. Prot. Bureau, 51 F.4th 616 (5th Cir. 2022), cert. granted, 143 S. Ct. 978 (2023).

May 8, 2023

Supported cases involve issues of commercial landlord duties, exclusive buyer agency, and rent control.

The Legal Action Committee voted to recommend, and the NAR Board of Directors approved, Legal Action Program support in three cases at the 2023 REALTORS® Legislative Meetings in Washington, D.C.

The first case involves the support of the Massachusetts Association of REALTORS® (MAR) amicus brief filing in Hill-Junious v. UTP Realty LLC, which is currently pending before the Massachusetts Supreme Judicial Court. In its brief, MAR argues a commercial landlord’s duty to prevent reasonably foreseeable criminal acts should not be extended to include a duty to learn of criminal acts that occurred prior to the landlord’s purchase of the property.

The Legal Action Program will also provide MAR support in connection with its amicus brief filing in support of the plaintiff broker in Huang v. Ma. Here, MAR argued against the adoption of a “clear statement” rule that would require a provision addressing damages in the event of a contractual breach and to protect brokers’ rights and ability to enforce exclusivity provisions in buyer agency agreements. The Massachusetts Supreme Judicial Court agreed with MAR’s position and declined to adopt such a clear statement rule.

Last, the program will provide support for the Hudson Valley Property Owners Association (HVPOA) and its pending New York state court proceeding against the City of Kingston that challenges the City’s enactment of rent control measures in response to its declaration of a housing emergency (Hudson Valley Property Owners Association v. City of Kingston et al). Here, HVPOA challenges the existence of a housing emergency and resulting imposition of rent control measures pursuant to New York’s Housing Stability and Tenant Protection Act. The Ulster County Supreme Court ruled that the methodology behind the emergency declaration was valid, but found the City lacked statutory authority to declare rent adjustments on fixed percentages and apply such adjustments retroactively. The parties are appealing the ruling. NAR’s support of this case furthers NAR policy and past legal advocacy opposing the adoption of rent control and stabilization laws due to their negative effect on housing inventory and property values.