A Tennessee broker has settled a nearly yearlong battle with a local Realtor association and founded an independent real estate board and multiple listing service.
The Mid-South Real Estate Board and Mid-South MLS launched in mid-August. Both cover Arkansas, Tennessee and Mississippi, and are based in Memphis, Tenn. The board is not Realtor-affiliated and has 325 members from more than 20 brokerages, according to founder Larry Mayall, formerly broker-owner of Memphis-based brokerage First National Realty Inc.
First National is the second-largest brokerage member of the Memphis Area Association of Realtors (MAAR), a trade group with territory that includes Tennessee’s Shelby, Fayette, Tipton, Hardin, Hardeman and McNairy counties.
A dispute between First National and MAAR arose last year concerning the ownership of another brokerage Mayall founded, 9to5 Realty LLC, which occupied the same building as First National.
First National was Realtor-affiliated and had more than 200 agents, while 9to5 was an independent brokerage with 38 agents. Both brokerages operated on a 100 percent commission model with flat fees of $75 or $100 per month and a per-transaction fee of $195.
"The focus of real estate has switched from the agency to a personal relationship with the agent, yet most brokers retain split-commission structures," Mayall said.
"(The flat-fee structure) is kind of like a big-box retail approach to real estate. That was certainly a new wrinkle here."
According to Mayall, the catalyst for the dispute with the association arose after his son, who owns 9to5, began an e-mail campaign to recruit new agents in August 2009.
"Some of the brokers heavily resented that (campaign) coming from a non-affiliated firm," Mayall said.
Mayall charged that some real estate powerbrokers in his market area do not take well to "somebody with a new idea."
Jules Wade, executive vice president of MAAR, denied that fear of competition was behind the dispute.
"That is not the case at all. MAAR is a membership organization that depends upon members for its growth and success. We thrive on membership and want all of our member firms to succeed," he said.
Rather, MAAR’s disagreement with Mayall arose out of an alleged violation of the National Association of Realtors’ Constitution, Wade said.
According to court documents, Wade sent Mayall a letter dated Aug. 28, 2009, detailing a requirement of the NAR Constitution that reads, in part, "Each sole proprietor, partner or corporate officer of the real estate firm who is actively engaged in the real estate business within the state where applying for membership or within the state in which the real estate firm is located shall be required to become a Realtor member if any other principal of such firm, partnership or corporation is a Realtor member with those states."
The association said that since Larry Mayall owned both Realtor-affiliated First National Realty and non-Realtor-affiliated 9to5 Realty, Mark Mayall, his son and the principal broker of 9to5, was required to become a Realtor.
According to the letter, that also meant that if Mark Mayall were to become a Realtor, the firm’s licensees would have the option of remaining non-member salespeople or joining MAAR. Under the first option, MAAR would bill Mark Mayall for membership dues based on the number of licensees at the firm, while under the second option the licensees would be billed directly.
Larry Mayall replied that he had divested ownership of 9to5. On Sep. 24, 2009, Wade sent Larry Mayall a letter indicating Mayall had not provided requested proof of his divestiture and that therefore MAAR’s board of directors had decided to bill Mayall $4,212 for the year’s membership dues for 32 of 9to5’s licensees (six were already paying dues directly to MAAR).
On Oct. 26, 2009, Mark Mayall signed a sworn affidavit that he was the sole owner of 9to5 Realty. Two days later, at MAAR’s request, the lawyer that handled Larry Mayall’s divestiture of 9to5 sent a letter to Wade affirming that Larry Mayall did not own any interest in 9to5 and the Mark Mayall was the brokerage company’s sole owner as of July 1, 2009.
In a Dec. 22, 2009 letter, MAAR asked Mayall to further clarify his relationship with 9to5. The crux of the matter, from MAAR’s perspective, was whether Mayall would still be considered a "principal" of 9to5 and therefore subject to the NAR requirement.
MAAR defined "principal" to include "officers, managers, and others with significant responsibility."
At a Jan. 28, 2010 meeting, MAAR’s board declared Mayall a principal of 9to5 and established a March 12 deadline for Mayall to comply with NAR’s requirement that "each sole proprietor, partner, or officer of 9to5 Realty must become a Realtor Member of MAAR or some other local association of Realtors."
Should Mayall not comply, MAAR membership and MLS access would be suspended for him and licensees associated with him.
On March 10, Mayall and First National filed a lawsuit against MAAR and sought a temporary restraining order to prevent suspension from the MLS for Mayall and First National.
In the complaint, Mayall said he "has no ownership of, and therefore no ability to compel, 9to5 agents to join a local Realtor board" and that suspension would mean he and the brokerage would be "irreparably harmed."
Mayall also submitted an antitrust complaint against MAAR for U.S. Department of Justice officials to consider.
On April 12, both parties reached a settlement agreement. Under the agreement, Mayall agreed to resign from membership in MAAR as of April 15 and not reapply for at least five years. MAAR also released Mayall and First National from liability for any unpaid dues or fees owed to MAAR through the date of the agreement.
Lastly, MAAR agreed to file and serve on Mayall, before April 15, a complaint charging him with violating Article 12 of the Realtor Code of Ethics, but to hold that complaint in abeyance while Mayall is not a member of MAAR or applying to become a member of MAAR.
Article 12 of the Realtor Code of Ethics and Standards of Practice states, "Realtors shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations."
That alleged violation referred to Mayall’s use of the memphismls.com domain name, which Wade referenced in his original August 2009 letter to Mayall.
Four days later, Wade sent Mayall a letter informing him that since he had resigned from MAAR, member services for him and First National licensees would be discontinued as of May 4, 2010, including access to the MLS.
Wade also told Mayall that he would send a copy of the letter to all First National agents on April 19, and subsequently did.
On April 22, First National agent Malcolm Settles sent an application to MAAR with the intention of taking over the "Designated Realtor" position from Mayall for the brokerage in order to prevent First National’s agents from being cut off from the MLS.
In an April 27 letter, MAAR deemed Settles’ application "deficient and objectionable" because, among other reasons, he had failed to include a $50 reinstatement fee for any First National licensees who wished to be reinstated as MAAR members following Mayall’s resignation.
The letter also said Settles was ineligible to become First National’s Designated Realtor "unless and until Mr. Mayall severs his connection with First National."
The next day, Settles submitted a new application, but MAAR did not process it on the grounds that it did not include reinstatement fees or a documented assertion that Mayall had severed his connections with First National.
Mayall, First National, and some First National agents then lodged a second lawsuit against MAAR, alleging, in part, breach of settlement agreement, which MAAR denied. That lawsuit was settled on July 1.
In that second settlement agreement, each party agreed that the settlement constituted a "compromise of disputed claims concerning 9to5 and the effect of Mayall’s resignation from MAAR."
According to the agreement, as of Sep. 30, 9to5 Realty would no longer operate as a real estate brokerage in MAAR’s territory.
In addition, MAAR agreed to approve Settles’ revised application to serve as Designated Realtor, retroactive to April 28. MAAR also agreed to reinstate First National licensees, retroactive to April 15 — without requiring payment of reinstatement fees.
The agreement also stipulated that Mayall was not required to sever connections with First National and would be allowed to remain there as a non-member salesperson. As long as he remained a Realtor member in another association, he would have access to MAAR’s MLS.
In contrast to the first settlement, the second settlement stated that any of the parties to the agreement would be entitled to injunctive relief (i.e. a court-ordered injunction) to enforce the terms of the agreement, and would not have to prove "irreparable harm" to get it.
Following the settlement, all of 9to5 Realty’s Memphis office agents have transferred out to a newly created non-Realtor division of First National, and that firm also has a Realtor-affiliated division. A 9to5 office in Olive Branch, Miss., will remain open.
In mid-September, Mayall transferred ownership of First National Realty to his daughter, LaDonna Thomas, a non-practicing attorney who is not a real estate licensee. Settles will be the brokerage’s Designated Realtor, while Mayall’s title has changed to "real estate broker."
Since the first settlement remains in effect, Mayall is no longer a member of MAAR but remains a member of the Crittenden County Board of Realtors and the Northwest Mississippi Association of Realtors.
First National is currently in the process of opening offices in Jackson, Miss., and, Nashville and Jackson, Tenn.
In August, an attorney from the Department of Justice contacted Mayall, requesting additional documents regarding his antitrust complaint, and that review is ongoing, Mayall said.
Wade said MAAR was "very pleased" to have resolved the litigation. He declined to say whether the association was satisfied with the arrangements Mayall had made after the settlement.
"We would need to know more than we know now," he said, and any arrangements would need to conform to MAAR’s bylaws, which were revised last month following the latest lawsuit.
Wade said MAAR had no comment on the new real estate board and MLS that Mayall founded.
"Mr. Mayall is entitled to pursue his business interests, and it will be a business decision for our members to make individually as to whether or not to become involved," Wade said.
The Mid-South Real Estate Board will announce its leadership in mid-October, Mayall said. He himself will not hold a position, but rather provide "support as needed," he said. He declined to provide the names of the board’s brokerage members, saying they would become apparent over time, and citing "a healthy respect for the history of the MAAR" related to competition.
He said the dispute with MAAR had helped spur him to found the new independent board.
"If (MAAR) hadn’t taken those … actions," which he deemed "extreme" — "I wouldn’t have done this," he said.
In a press release announcing the new board, Mayall also noted "a real need for viable alternatives to the status quo."
"The system simply isn’t working for the average agent who is working harder than ever to barely survive. The future of real estate is open access, not closed control. The Internet is very democratic; buyers and sellers don’t care about turf — they simply want service and results.
"Like it or not, the era of split-commission, proprietary MLS systems and exorbitant fees are gone forever," he said.
The MLS will run on a platform from California-based Discover Software — one of the platform vendors for a prospective statewide MLS in California.
"We don’t expect our agents to work harder while we trim away the tools and support systems necessary for growth. Instead, we are investing in growth even while others are cutting back," Mayall said in a separate statement.
A month and a half after its launch, the MLS has about 500 active listings.
"It’s a new baby and I think we’re going to be very successful with it as a really competitive tool for agents. There’s no textbook on how to do this. We’ll all learn together as we move through it," Mayall said.
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