How to Avoid Non-Compliance with the National Association of REALTORS® Code of Ethics

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The National Association of REALTORS® (NAR) has been the peak trade association for the real estate industry since its original founding in 1908. When you join your local REALTOR® association, you also join and receive benefits from your state association as well as the NAR. With that membership comes a requirement to follow the NAR Code of Ethics. According to NAR, the Code ensures that “consumers are served by requiring REALTORS® to cooperate with each other in furthering clients’ best interests.”

The Code is in addition to the current laws and regulations a real estate professional must comply with.  While the Code is only enforceable for those who choose to become a REALTOR® or REALTOR® ASSOCIATE, anyone can raise a complaint against a NAR member.

What Do You Need To Do To Comply?

The NAR Code of Ethics and Standards of Practice consists of 17 articles. In summary, to comply, you should:

  • Protect and promote the interests of your client, while maintaining a commitment to honest practice in your dealings with all parties
  • Avoid exaggeration, misrepresentation or concealment of the facts
  • Cooperate with other brokers, except when it’s not in your client’s best interest
  • Provide full disclosure to the other party’s agent if you’re involved in buying or selling property in which you have an interest. This also applies to a property in which any of your immediate family, your company or employees of your company hold an interest.
  • Not accept any rebate, commission, or profit on expenditures without your client’s consent
  • Not accept compensation from more than one party unless this is fully disclosed and client consent is obtained
  • Keep escrow and client funds separate in a special bank account
  • Use clear and understandable language in all of your agreements, terms and conditions, and other documents. When agreements are signed, you should give the other party a copy.
  • Do not discriminate against people because of their religion, race, color, sex or otherwise.
  • Ensure your services conform to the standards of practice and competence expected in the real estate industry. Do not work out of your area of competence, unless you engage assistance from someone who is competent and you disclose this to the client.
  • Be honest and truthful in all communications, advertising, marketing and representations
  • Refer your client to legal counsel for specific legal advice to avoid engaging in activities which constitute the “unauthorized practice of the law.”
  • If charged under the Code, respond with the pertinent facts and never obstruct NAR processes.
  • Don’t make false or misleading statements about other real estate professionals.
  • In the event of a dispute that can’t be resolved through mediation, REALTORS® agree to arbitration rather than litigation on the matter.

Key Recent Changes To The Code of Ethics

The 2018 Code of Ethics and Standards of Practice includes a new clause which prohibits REALTORS® from using misleading images. Read the changes to the Code.

Effective January 1, 2017, all NAR members are required to undertake 2.5 hours of ethics training every 2 years.

What Are The Consequences Of Non-Compliance?

Local REALTORS® associations deal with non-compliance with the NAR Code of Ethics and Standards of Practice.  The national organization does not deal with complaints about individual REALTORS®.

The board/association will only deal with the Code of Ethics infringement. This is separate to any complaints or decisions through the courts or state licensing authorities. It’s possible a REALTOR® could face sanctions for a breach of the Code of Ethics and through a licensing authority concurrently.

Even if you’re not a REALTOR®, complaints can still be lodged with the state real estate licensing authority or the courts about you.

Discipline for Code of Ethics violations will vary according to your local association, but typically include things like:

  • A requirement to attend additional ethics training
  • Reprimand letter
  • Fines
  • Suspension of membership (and termination of membership for serious or repeated breaches).

Penalties your REALTOR® association cannot impose include:

  • Damages or payments to the complainant
  • Suspension or revocation of your real estate license.

Dealing With Your Concerns About Not Complying

If you’re in a situation where you think another agent has violated the Code of Ethics, you should talk to that agent, as sometimes misunderstandings or miscommunications do occur. Alternatively, you could speak to a principal broker in the agent’s firm. If you’re not satisfied with the outcome of this discussion, you may wish to approach your local real estate association informally.

If you’re considering submitting a formal ethics complaint, you’ll need to first confirm the agent is a REALTOR®.  If you’re unsure, check online with your state REALTOR® association.

If they’re not a REALTOR®, you still may have recourse through the state real estate licensing authority and the court system.

Protect Yourself And Your Business

Real estate is a fast-paced industry and sometimes situations occur where you’re the subject of a complaint or are the complainant with concerns about another agent. To protect yourself and your business, be sure you have adequate insurance errors and omissions insurance coverage. Call CRES today at 800.880.2747 to find out more about Real Estate E & O + ClaimPrevent®.

Have you ever been part of a transaction where you had ethical concerns about the other party? What steps do you follow to protect your own business?

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published June 27, 2018

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