The California Department of Real Estate will not appeal a federal court ruling in favor of an Internet-based flat-fee property listing company.

ForSaleByOwner.com in May 2003 challenged the state’s enforcement of a 1959 real estate law that requires entities offering real estate property listings to obtain a real estate brokerage license while exempting newspapers from these licensing requirements.

U.S. District Court Judge Morrison England Jr.

The California Department of Real Estate will not appeal a federal court ruling in favor of an Internet-based flat-fee property listing company.

ForSaleByOwner.com in May 2003 challenged the state’s enforcement of a 1959 real estate law that requires entities offering real estate property listings to obtain a real estate brokerage license while exempting newspapers from these licensing requirements.

U.S. District Court Judge Morrison England Jr. ruled in November that the state violated First Amendment sites in requiring Web sites to obtain a broker’s license in order to display listings.

Bill Moran, assistant commissioner of enforcement for the state’s real estate department, said today, “We have decided not to appeal the decision.” Moran declined further comment.

Colby Sambrotto, chief operating officer for New York-based ForSaleByOwner.com, said, “I think that’s the right choice. There is no good reason to treat Internet companies any differently than newspapers and I think the original decision is clear on that.” He added, “The original decision is a great one for Internet-based companies everywhere.”

June Barlow, legal counsel for the California Association of Realtors, was not available for comment. Barlow in an interview in late November said the association had not taken a formal position on whether it would support an appeal. At that time, Barlow said the judge’s decision raised a question over when a robust Web site crosses the line from raw advertising to brokerage activity.

In early 2001, the California Department of Real Estate began to enforce licensing law against “for-sale-by-owner” and classified advertising Web sites that allow consumers to buy and sell homes without a real estate broker.

The court found that “vast advances in technology” have occurred since the state’s real estate law was passed.

And while the state Department of Real Estate “vaguely attempts to paint newspapers as geographically situated and relatively more stable than Internet companies, they have not established why this should require Web sites like FSBOs to obtain a California broker’s license when online services doing exactly the same thing are not subject to any licensing requirement so long as they are operated by a ‘newspaper,'” the ruling also states.

ForSaleByOwner.com, founded in 1997, accepts a flat fee for marketing properties online. The company also offers links to mortgage providers, title companies, lawyers, home inspectors and appraisers, and a range of other real estate-related services. ForSaleByOwner.com was represented in the lawsuit by The Institute for Justice, a libertarian law firm that has a mission to represent entrepreneurs in cases involving government regulation.

Steve Simpson, a senior lawyer for the Institute for Justice, said in a statement today, ” This is an important case with broad implications for e-commerce. The Internet should be treated like traditional media. There’s no justification for licensing publications of either type. We hope other states recognize this simple truth as well.”

Simpson also said that “information is more important to the economy than ever before,” though some new laws appear to “favor local brick-and-mortar businesses at the expense of Internet competitors. These laws harm businesses and consumers, stifle innovation, and perpetuate wasteful and antiquated business practices.”

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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