SAN FRANCISCO — The board of directors of the National Association of Realtors approved a slew of new policies Monday, including rules that will require agents complete ethics training less frequently, redefine when agents can claim their services are “free” and deploy $6 million to start a new nonprofit focused on promoting homeowner interests.
Code of ethics training
In a relatively close vote, 489 in favor and 352 opposed, the board voted to require NAR’s 1.3 million members to complete training on the Realtor Code of Ethics every three years instead of every two years and that the current two-year cycle end on Dec. 31, 2021.
The board, which always meets on the last day of NAR’s two annual conferences, approved the policy change despite a recommendation from the NAR Executive Committee to defeat the proposal, putting it at odds with NAR’s leadership team, which recommended the proposal.
Discussion on the floor before the vote was largely in favor of the policy change.
NAR Director Leigh York, a member of the presidential advisory group (PAG) that recommended the change, said “tears were shed” as PAG members discussed the training requirement during meetings.
She said NAR owed the “over a million Realtors out on the street today” the “very best product” and the two-year requirement was resulting in them being herded “like cattle” through training.
“If we want to give them something with meaning, that has value, that is relevant in their marketplace, we need three years. If we could accomplish that goal in a two-year period, then why didn’t we?” she said.
Five years ago, the trade group’s board of directors voted to require members to complete the training every two years, instead of the previous four years.
NAR formed the PAG after its annual conference last year to address challenges faced by local Realtor associations in administering the two-year requirement.
Michael Labout, chair of the PAG, reiterated comments he made during the Association Executives Forum on Friday.
“This is not a reduction in the importance of the code of ethics at all or to our commitment to professionalism” but rather will “help us resolve an abundance of administrative issues that have occurred with the shorter time frame,” he told his fellow directors.
Director Cindy Chandler from the Charlotte Region Commercial Board of Realtors spoke against the proposal, saying she was uncomfortable with changing the policy for administrative reasons and wanted to keep the frequency of the training.
“You can’t teach ethics to the bad actors, but you can teach those who just don’t know any better,” she said.
Discrimination, when agents are ‘free,’ and ethics discipline
The board overwhelmingly approved three recommendations from NAR’s Professional Standards Committee. All passed without discussion from the directors.
- To adopt a new policy: Realtors may not refuse to cooperate on the basis of a broker’s race, color, religion, sex, handicap, familial status, national origin, sexual orientations, or gender identity. Before today’s vote, NAR policy prohibited “discrimination against a cooperating broker on the basis of any personal characteristic, including their membership in a protected class,” the committee wrote in its report to the board. The new policy “reaffirms NAR’s commitment to diversity and a real estate industry free from the scourge of discrimination,” the report said. The policy proposal passed 665 to 11.
- Previously, under NAR’s Code of Ethics Standard 12-2, Realtors could claim their services were “free” provided that the terms governing the availability of the offered product or services were clearly disclosed at the same time. In an ongoing bombshell commission lawsuit filed earlier this year, seller plaintiffs argued that Standard 12-2 means most buyers think they are not paying for brokerage services and “are effectively told they have no reason to seek a reduction in the buyer-broker commission.” That policy has now been amended to state: Unless they are receiving no compensation from any source for their time or services, Realtors may use the term “free” and similar terms in their advertising and in other representations only if they clearly and conspicuously disclose (a) by whom they are being, or expect to be, paid; (b) the amount of the payment or anticipated payment; (c) any conditions associated with the payment, offered product, or service; and (d) any other terms relating to their compensation. The policy change is meant “to ensure adequate protection of consumers, clarity in requirements, and legal defensibility,” according to the committee’s report. The recommendation passed 627 to 19.
- To extend the California Association of Realtors Lateral Discipline Pilot Program to Dec. 31, 2020 rather than Dec. 31, 2019, as previously slated. C.A.R. will also not be required to make any further reports to NAR regarding the program, according to the committee’s report. NAR originally authorized the pilot in May 2012. Under the program, “Realtors belonging to two (or more) local associations and who are suspended or expelled from one local association for violations of the Code of Ethics would be subject to the same discipline in all other local associations (in California) in which they hold membership,” the committee report said. At this past week’s conference, C.A.R. asked the committee to extend the pilot or make it permanent. The committee recommended extending the pilot for a year to have “time to consider a similar nationwide program,” the report said. The recommendation passed 619 to 37.
A new NAR nonprofit
NAR’s Finance Committee recommended the trade group pull $6 million from its political advocacy funds to form a “NAR-controlled and closely held” 501c(4) nonprofit dubbed the American Property Owners Alliance (APOA). The board approved the recommendation with no discussion, 771 to 22.
According to a line item detail sheet provided by the committee, in 2020 APOA will spend $2.7 million on consulting, $2.4 million on political events, $516,500 on advertising, $150,000 on legal fees and $140,000 on speaker fees, among other expenses.
NAR’s RPAC Trustees Federal Disbursements Committee originally recommended APOA’s creation to “broaden and modernize its advocacy and political reach,” the Finance Committee report said.
“Tax law requires the 501c4 organization to maintain a primary purpose of furthering the common good or general welfare of American property owners. So long as the 501c4 maintains its primary purpose of pro-property rights advocacy and education, it can also engage in limited direct political activity,” the report added.
Therefore, 60 percent or more of APOA’s budget will be dedicated to “connecting with property owners across America on issues that affect their ability to own, transfer and enjoy their property” and up to 40 percent on direct political activity, such as political communications and contributions to other 501c4 organizations and super PACs.