A judge for a U.S. District Court in Idaho has granted class-action status to four separate antitrust lawsuits, which allege that four real estate brokerage companies engaged in illegal commission practices.
The four class-action lawsuits were each filed against individual real estate companies — including Aspen Realty, Holland Realty, Sel-Equity Co. and Park Pointe Realty (doing business as John L. Scott Real Estate) — and will proceed as separate cases.
The real estate companies allegedly charged a commission for their services that was based on the purchase price of undeveloped land and the actual or estimated price of homes to be built on those undeveloped lots, rather than based solely on the price of the undeveloped lots, according to the lawsuits.
This practice, the lawsuits charge, constitutes a tying arrangement that violates the Sherman Antitrust Act.
U.S. District Court Judge B. Lynn Winmill ordered that home buyers are eligible to join the lawsuits if they: “bought an undeveloped lot in a subdivision in the Boise, Idaho, greater metropolitan area in which the (four real estate companies) has or had the exclusive right to market or sell the subdivision lots on behalf of the developer; were required to build a house on the lot in order to buy the lot; and were required to pay (the real estate companies) a commission based on the cost of the lot plus the actual or estimated cost of the house in order to buy the lot.”
Craig Spiegel, a lawyer for Hagens Berman Sobol Shapiro, a law firm that specializes in class-action lawsuits, said it’s not yet known how many home buyers are eligible to join the lawsuits, though he roughly estimated that perhaps 20,000 buyers could be included in the defined class, with eligibility stretching back to 2001. Spiegel said that the commission practices alleged in the lawsuits may be ongoing.
The lawsuits originally were combined as a single complaint, and the judge ordered the cases to be split because there was no evidence that the companies had colluded in establishing the commission practices. In his February order, Judge Winmill dismissed some of the allegations in the initial complaint, and granted permission for the complaints relating to alleged illegal tying agreements to proceed.
“Prices were driven up significantly” by the alleged commission-tying practices, Spiegel said. There were several instances in which the actual prices of the houses to be built were not the same as the prices that were listed in the purchase agreements, he said, so that the real estate commissions in some cases appeared to be based on an estimated cost.
The practice of charging a real estate commission for the sale of an undeveloped lot and the price of the house to be built on that lot, “We believe … is quite uncommon,” Spiegel said, adding, “It’s very common in that area,” which is known as the Treasure Valley area in Idaho.
Meanwhile, Eugene A. Ritti, a lawyer for Hawley Troxel Ennis & Hawley LLC who is representing Holland Realty, said that the land sale and home sale “was all one transaction,” in the real estate company’s view. “There were not separate transactions here.” There were “presumably separate commissions being charged in various amounts” for each of the transactions, Ritti said.
While at least one of the lawsuits has alleged that the real estate commission rate charged in the land sale was not negotiable, Ritti said, “Within the industry … commissions are all over the ballpark. You get whatever you can take.”
Ritti’s firm contends that the lawsuit against Holland Realty is without merit, and the class-action certification does not validate the allegations in the complaint. “We feel that everything that Holland Realty has done is within the letter and spirit (of the law),” he said.
T.J. Angstman, a lawyer for Angstman Law in Boise, Idaho, who is representing Sel-Equity Co., said, “It’s my client’s position that once the court is actually considering the facts of the transactions that the court will find there has been no violation, that the conduct is perfectly legal.” Angstman said he has filed a motion for summary judgment with the court that seeks a determination on the case based on the information presented.
Angstman said that the undeveloped lots “aren’t being offered to people who don’t want to buy a home — they’re being sold so a home can be built on them.” He also noted said that Sel-Equity’s practices served to eliminate “double commissions,” and that the company treated every transaction as a unique deal.
A February court filing, brought by lot-buyers Robert and Renae Bafus, alleges that the couple was looking for an undeveloped lot in March 2000 and that they had already selected a building contractor. They visited the Chaumont Subdivision in Eagle, Idaho, and contacted an agent for Coldwell Banker Aspen Realty based on a sign they saw at the subdivision, according to the complaint.
After negotiating a purchase price of $34,000 for the lot, the agent allegedly drafted an agreement that listed the Bafuses as the buyer and Walker Building, the couple’s building contractor, as the seller. The drafted purchase agreement listed the home price at $151,000 instead of $34,000 for the lot, the court document alleges. “The (price) reflected the cost of the lot plus the cost of the house to be built.”
The couple later contacted another real estate agent affiliated with the same company, who allegedly “told the Bafuses they could not buy just the lot, that the commission of 6 percent was not negotiable, and that the commission had to be based on the cost of the lot and house together. Coldwell Banker Aspen Realty, despite being an agent for the Bafuses, refused to submit an offer for the lot alone and told the Bafuses they could not do so,” the complaint alleges.
The real estate commission for the sale of the undeveloped lot should have been $2,040, while the actual commission charged was $9,060, the complaint alleges. The real estate company, “acting alone or in concert with others, would allow builders to build in the subdivision only if the builders agreed to include a 6 percent commission based on the price of the developed lot as opposed to just the price of the undeveloped lot,” the suit alleges, and the company “breached its duty to accurately inform the Bafuses of Aspen Realty’s conflict of interest while acting as their agent.”
The practice of charging commissions “on the cost of houses to be built on undeveloped lots and conditioning the purchase of the lot upon payment of a commission on the to-be-built house … is a common practice mirrored throughout the Boise area by other brokerage houses doing business in the area,” the lawsuit charges.
A.J. Bohner of Bohner Law Office in Boise, Idaho, could not be reached for comment about the lawsuit, though he stated in a response to the complaint that Aspen Realty acted legally in its commission practices. “The amount of real estate commission associated with the … real estate transaction … were fully disclosed to them prior to the transaction and were lawfully charged and collected.”
Also, the response to the complaint states that the alleged actions “were undertaken in accordance with applicable Idaho laws governing real estate transactions,” that the real estate company has not violated the Sherman Act or any Idaho state,” and that any damages suffered were the fault of the home buyers’ “own actions or inactions.”
The four class-action lawsuits are: Robert and Renae Bafus v. Aspen Realty Inc., Curtis and Gwendolyn Blough v. Holland Realty Inc.; Gary and Shawna Yasuda v. Sel-Equity Co., and Dave and Emily Merrithew v. Park Pointe Realty Inc.