Even in the middle of a pandemic, other risks abound, especially in the real estate business. The National Association of Realtors’ legal team updated members on several legal issues Wednesday afternoon, all of which could potentially hit agents’ and brokers’ pocketbooks, and offered some tips on what they can do to avoid them.
NAR General Counsel Katie Johnson and NAR Associate Counsel Charlie Lee offered the latest on cybercrime, wire fraud, website accessibility, lawsuits related to the Telephone Consumer Protection Act, lawsuits against NAR and legal concerns in regards to the coronavirus outbreak.
They spoke during the Risk Management Issues Committee meeting at the Virtual Realtors Legislative Meetings, NAR’s first-ever virtual midyear conference. Two-thirds of its sessions are closed to nearly all NAR members and press, but the 1.4 million-member trade group is streaming some sessions, including the committee meeting.
Class-action antitrust commission lawsuits
The class-action antitrust commission lawsuits brought by plaintiffs Moehrl and Sitzer against NAR, Realogy, RE/MAX, Keller Williams and HomeServices of America allege that the sharing of commissions between listing and buyer brokers inflate seller costs and seek to have homebuyers pay their broker directly instead.
NAR filed motions to dismiss the suits and the one for the Sitzer case in Missouri was quickly denied. The court has yet to rule on the Moehrl one in Illinois. Discovery is underway in Missouri and the next big step will be when the plaintiffs try to have the case certified as a class action in 2021, according to Johnson. NAR will argue “very strongly” that certification should be denied, she said.
She urged Realtors to be transparent and clear in their messaging about what value they bring and why and how they’re getting paid. “Where you can help and every member of NAR can help is by very clearly articulating your value…what you bring and who you are,” Johnson said. That would be beneficial both for consumers and NAR’s defense, she added.
Clear Cooperation Policy lawsuit
On Monday, Top Agent Network (TAN), a firm that operates a members-only private group of top-producing real estate agents, filed an antitrust lawsuit against NAR and two other Realtor associations over NAR’s Clear Cooperation Policy, which is designed to curtail pocket listings.
Johnson said NAR had yet to be served with the lawsuit. Still, she said, “We think the allegations are baseless and we will defend [against] them.” She said NAR had sought antitrust legal advice in regards to the policy “from the beginning” and is confident the policy is pro-competitive because it exposes listings to the greatest amount of agents, brokers, buyers and sellers and therefore ensures “that everyone has the same information regardless of class or whatever special group they might be in,” she said.
Alleged violations of the Telephone Consumer Protection Act
Lawsuits alleging violations of the Telephone Consumer Protection Act (TCPA) continue to proliferate, including those targeted against brokerages. Johnson reminded Realtors that the TCPA prohibits anyone from contacting consumers for commercial purposes using an autodialer without consumers’ prior written consent.
“The lawsuits are real,” Johnson said. Law firms are on the lookout for brokers that are sending listings to consumers without their prior written consent, she added. When someone asked whether the TCPA applies when a broker texts their own agents, Johnson said the TCPA applies to commercial messages, but regardless “it would be a good idea” for brokers to get permission from their agents to contact them, perhaps even in their agreement with the agents. She pointed out that some of the plaintiffs in TCPA suits are agents that previously belonged to other brokerages.
Websites violating the Americans with Disabilities Act
For years, NAR has warned its members about being accused of violating the Americans with Disabilities Act (ADA) when their websites are not accessible.
Johnson told viewers that when they adopt new technologies, they should “take a minute to talk to the vendor about their accessibility, about how they’ve constructed the app or the tool to be accessible to individuals with disabilities.” If the vendor hasn’t made the tool accessible, then agents and brokers should talk to the vendor about how they might protect or indemnify them in the event there is litigation, Johnson said.
COVID-19 resource page
NAR has created a resources page for guidance on what to do during the pandemic. It includes transaction guidance, fair housing guidance — the jury is still out on whether COVID-19 can be considered a disability, Johnson said — and a workplace re-entry checklist for those in areas that are re-opening (which NAR itself is using).
It recommends the creation of several policies, including a preparedness plan for what to do if an employee contracts the virus and also offers a sample preparedness plan. Johnson said the question of what a brokerage’s liability is if someone thinks they got the virus from one of their agents is “uncharted territory,” but she said she thought it would be “impossible to prove causation” when so many people that have the virus are asymptomatic.
“That said, plaintiffs attorneys are rarely deterred by things like impossible causation,” Johnson said. “NAR is monitoring that and is of the mindset that reasonable limitations need to be implemented in the law in order to prevent an abundance of frivolous lawsuits.”
Wire fraud and cyber crime
Wire fraud continues to persist as fraudsters attempt to intercept real estate transaction funds electronically, according to Johnson. She encouraged agents to educate their clients because a knowledgable and aware buyer or seller client is the best way to avoid wire fraud.
In addition, she said agents should refrain from emailing wire instructions because wire fraud happens through compromised email. Lee offered some statistics from the IC3 division of the FBI, which deals with internet-related crime, and showed that such crime results in financial losses of billions per year. The crime that attracts the biggest losses is when email accounts are compromised, according to Lee. The report calls this crime business email compromise (BEC) and email account compromise (EAC).
He offered a few recommended practices to avoid wire fraud, including verifying wire instructions with an independent phone number.
In February, NAR announced a partnership with CyberPolicy to provide a new cyber liability insurance program for Realtors. Amber Bachman, director of cyber at CyberPolicy, spoke during the committee meeting about the program and noted that it offered third-party wire transfer coverage, which would cover an agent’s client, while most policies only cover the agent.
Bachman said her company had seen a five times increase in “phishing,” which is when a someone masquerades as a legitimate organization online in order to try to obtain financial or other confidential information. Scammers will send an email about COVID-19, perhaps offering information on the people that have it, and get people to click on a link or download a file that infects their device with malware, according to Bachman.
She also offered some tips to combat cybercrime, including ensuring that antivirus software is up to date and not mixing work and pleasure on the same device, especially if kids who might click on anything randomly are using it.
NAR also has a wire fraud resources page on its website.