May 9, 2019 Topics

• Fair Housing • Lawful Source of Income • Gender Identity • Personal Letters • Service Animals • New Smoke Detector Law • NAR Code of Ethics: Standard of Practice 1-7 • New Sexual Harassment Law • Social Media • Proper Use of Corporate Titles/License Types • Certificate of Occupancy for Rentals • Coming Soon Listings • Eavesdropping • DOS Opinion Escrow Account Charges • Recent Decisions of Interest • Agency

FAIR HOUSING: LAWFUL SOURCE OF INCOME 5

Lawful Source of Income

• Effective April 12, 2019 (a/k/a NOW) • New protected class in NY • “Lawful source of income” • Executive Law §292 and §296 6

What is Lawful Source of Income • "lawful source of income" shall include, but not be limited to • child support • Alimony • foster care subsidies • income derived from social security • any form of federal, state, or local public assistance • housing assistance including, but not limited to, section 8 vouchers • any other form of housing assistance payment or credit whether or not such income or credit is paid or attributed directly to a landlord, and any other forms of lawful income. 7

What is Lawful Source of Income • The provisions of this subdivision shall not be construed to prohibit the use of criteria or qualifications of eligibility for the sale, rental, leasing or occupancy of publicly-assisted housing accommodations where such criteria or qualifications are required to comply with federal or state law, or are necessary to obtain the benefits of a federal or state program. A publicly assisted housing accommodation may include eligibility criteria in statements, advertisements, publications or applications, and may make inquiry or request information to the extent necessary to determine eligibility. 8

Exemptions from the Law • If a licensee is involved, there are no exemptions or carve outs for: • Owner-occupants • Dwellings with 1 or 2 units • Commercial property • Vacant land • Anything else a landlord may try to justify 9

Criteria or Qualifications

• Only permitted for publicly assisted housing as defined in Executive Law §296(11) • Issue of full rent being paid vs partial payment • “I need credit score to see if they can pay utilities etc.” 0

Criteria or Qualifications

• No longer permitted to advertise anything that expresses, directly or indirectly, any limitation, specification or discrimination as to lawful source of income such as: • No Section 8 • No Programs 1

That’s what my client wants

If a landlord tells you not to present any applications from tenants receiving section 8, you would need to advise the owner you are unable to follow their directive as it is unlawful. 2

That’s what my client wants

Any licensee receiving a directive from the owner, landlord, property manager, rental agent or other licensee to discriminate against individuals because of their lawful source of income should advise the individual that such actions are unlawful and you are unable to follow their directive. 3

That’s what my client wants

• If you know the landlord will accept an application from a section 8 tenant but will never approve the application, the licensee should terminate their involvement with the discriminating individual or entity. • Document the discriminatory actions of the individual or entity and your termination of any relationship in the event any action is taken by the person(s) being discriminated against. 4

What we do know • It is not unlawful to ask about income, only to discriminate based on lawful sources of income. Housing providers may ask about income, and about the source of income, and require documentation, in order to determine a person’s ability to pay for the housing accommodation, but must accept all lawful sources of income equally 5

What we don’t know

• Can landlords or their agent require the tenant to submit to tenant screening that includes credit report, criminal report and history of evictions under the following scenarios (please indicate which reports are permissible):

• a) The full rent is paid by a program. • b) Only part of the rent is paid by a program and the balance is the personal responsibility of the tenant. 6

What we don’t know

• Can a landlord or their agent require a minimum credit score?

• Can an application ask for income information (W-2, pay stub etc.), employment status or must it only ask for “Lawful source of income”?

• What kind of proof can be asked for to show the tenant is eligible for a program? 7

What we don’t know

• Does a landlord have to accept a voucher from a program instead of a cash security deposit?

• Can a landlord require a new tenant to provide the first month’s rent, the last month’s rent, security deposit and broker commission at time of occupancy?

• If a broker normally charges one month’s rent as a commission and a program only offers the broker 50% of one month’s rent to the broker for a commission, can the broker refuse to work for less than they normally charge or are they forced to accept the lower amount? Can they ask the tenant to cover the additional 50%? 8

What we don’t know

• If the program requires an inspection of the premises and an item fails the inspection (based on the program standards) but is not a violation of any code, law, rule or regulation and is valid to rent, does the landlord have to repair the premises to the standards of the program inspection?

• For tenants eligible for a program, regardless of whether the rent is covered partially or in full, are landlords allowed to inquire as to how they will be paying utilities? The concern of landlords is if the program covers the whole rent and they have no other means to pay utilities, are landlords required to accept the tenant and pay the utilities themselves? 9

When will you know

• When NYSAR receives a response from DHR, we will send an email to every NYSAR member. FAIR HOUSING: GENDER IDENTITY OR EXPRESSION Executive Law §292 effective 2/24/2019…kind of!!! (35) The term "gender identity or expression" means a person's actual or perceived gender-related identity, appearance, behavior, expression, or other gender-related characteristic regardless of the sex assigned to that person at birth, including, but not limited to, the status of being transgender. Kind Of????

• On January 19, 2016, 9 NYCRR §466.13 added “Gender Identity” as a protected class under the New York Human Rights Law.

• The regulation included “Gender Identity” under the definition of “sex”. Executive Law §292 effective 2/24/2019…kind of!!! New: The term "gender identity or expression" means a person's actual or perceived gender-related identity, appearance, behavior, expression, or other gender-related characteristic regardless of the sex assigned to that person at birth, including, but not limited to, the status of being transgender.

Old: “Gender identity means having or being perceived as having a gender identity, self-image, appearance, behavior or expression whether or not that gender identity, self-image, appearance, behavior or expression is different from that traditionally associated with the sex assigned to that person at birth.” NAR Code of Ethics Article 10 • REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. (Amended 1/14) • REALTORS®, in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. Executive Law 296 3-b. It shall be an unlawful discriminatory practice for any real estate broker, real estate salesperson or employee or agent thereof or any other individual, corporation, partnership or organization for the purpose of inducing a real estate transaction from which any such person or any of its stockholders or members may benefit financially, to represent that a change has occurred or will or may occur in the composition with respect to race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, marital status, or familial status of the owners or occupants in the block, neighborhood or area in which the real property is located, and to represent, directly or indirectly, that this change will or may result in undesirable consequences in the block, neighborhood or area in which the real property is located, including but not limited to the lowering of property values, an increase in criminal or anti- social behavior, or a decline in the quality of schools or other facilities. Executive Law 296 5(c) It shall be an unlawful discriminatory practice for any real estate broker, real estate salesperson or employee or agent thereof: (1) To refuse to sell, rent or lease any housing accommodation, land or commercial space to any person or group of persons or to refuse to negotiate for the sale, rental or lease, of any housing accommodation, land or commercial space to any person or group of persons because of the race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, or familial status of such person or persons, or to represent that any housing accommodation, land or commercial space is not available for inspection, sale, rental or lease when in fact it is so available, or otherwise to deny or withhold any housing accommodation, land or commercial space or any facilities of any housing accommodation, land or commercial space from any person or group of persons because of the race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, or familial status of such person or persons. Executive Law 296 5(c) It shall be an unlawful discriminatory practice for any real estate broker, real estate salesperson or employee or agent thereof: (2) To print or circulate or cause to be printed or circulated any statement, advertisement or publication, or to use any form of application for the purchase, rental or lease of any housing accommodation, land or commercial space or to make any record or inquiry in connection with the prospective purchase, rental or lease of any housing accommodation, land or commercial space which expresses, directly or indirectly, any limitation, specification, or discrimination as to race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, or familial status; or any intent to make any such limitation, specification or discrimination. Executive Law 296 (d) It shall be an unlawful discriminatory practice for any real estate board, because of the race, creed, color, national origin, sexual orientation, gender identity or expression, military status, age, sex, disability, marital status, or familial status of any individual who is otherwise qualified for membership, to exclude or expel such individual from membership, or to discriminate against such individual in the terms, conditions and privileges of membership in such board. FAIR HOUSING: PERSONAL LETTERS FROM BUYERS 0

The Letter

• Listing Agent receives purchase offer • Purchase offer contains personal letter from buyer(s) • What should Listing Agent do? 1

Where did the Letter Originate?

• Should only be done at specific request of buyer • Licensees should NEVER EVER suggest use of letter • Subjecting seller and broker to fair housing violation 2

We Would Love to Live…

• Usually, letters are an emotional plea • Often directly or indirectly mentions protected classes • “I can see our family celebrating…here” • “My wife and I would love to raise our family” • “Our children's pictures will line the staircase” • “Our daughter loves to swim” • “Our son loves to play basketball” • “We want to send our children to the Elementary School” 3

We Would Love to Live…

• If letter is a contributing factor to acceptance/denial it is a fair housing violation • Buyer’s agent • discuss fair housing violation • do not read or accept letter drafted by buyer • Listing agent • Discuss liability at listing interview and do not deliver letter to seller • Strongly advise against accepting letter from buyers 4

The Buyer Wants the Letter

• Listing agent and/or buyer’s agent should not be involved in the delivery of letter • Listing agent/buyer’s agent should not have any knowledge as to the contents of the letter • If buyer wants letter make them deliver it • Recommend that seller have their attorney review the letter • Have a paper trail showing your good faith effort at advising against practice 5

Liability

• Non-prevailing purchaser is aggrieved party • Finds out why they lost out… • “The seller wanted the new family to have it” • DING…DING…DING • If a licensee is involved, they will be a named party if an action is filed • Licensee will have to show they had no knowledge of letter or show good faith effort 6

The Painful Part

• If you know the seller has made their determination as a result of the aforementioned letter, you should withdraw from the transaction • Commissions are not worth prosecution for fair housing • DON’T BE THE TEST CASE FAIR HOUSING: SERVICE ANIMAL ISSUES Service Animals

• A reasonable request for accommodation must meet the following criteria: 1. Does the person seeking to use and live with the animal have a disability — i.e., a physical or mental impairment that substantially limits one or more major life activities? 2. Does the person making the request have a disability-related need for an assistance animal? In other words, does the animal work, provide assistance, perform tasks or services for the benefit of a person with a disability, or provide emotional support that alleviates one or more of the identified symptoms or effects of a person's existing disability? Service Animals

• A service animal is not a pet • Landlord is prohibited from: • Denying a tenant because of a service animal • Charging more rent for service animal • Charging a ‘pet fee’ for service animal • Treating tenant any differently except permitting service animal Service Animals

• Landlord prohibited from denying request because unable to determine a disability. • Landlord may ask for documentation from a reliable source if the disability is not apparent. • If the disability is apparent, landlord can ask if the connection between the disability and the need for the identified service animal is not apparent. • HUD provided examples of what could constitute proper documentation of a disability including a letter from a physician, social worker, psychologist, or “other mental health professional” Service Animals

• Determination on whether to grant an accommodation request for a service animal needs to be made by the landlord and not the licensee. • While the licensee could request documentation from the applicant in support of the accommodation request, this information should always be gathered at the direction of the landlord. • Licensees should always make it clear to the applicant that the request is being made by the landlord, not the licensee. • If you know request is not permitted, not protected. Service Animals

• Emotional support dog • Tenant evicted over “pet” • Claims dog is emotional support animal • No disability of any tenant • Lower court ruled for tenant “in the spirit” of Fair Housing • Appellate court reversed • Criteria must be met for disability to qualify Service Animals

• https://www.servicedogcertifications.org/

• https://www.certifymydog.com/

• https://www.servicedogsamerica.org/

• https://www.officialservicedogregistry.com/ Service Animals

• Are you qualified to make the determination as to the permissibility of a service animal?

• The answer is NO!!!

• This is a decision that must be made by the landlord under advice from counsel Service Animals

• Current HUD guidance available

• FHEO Notice: FHE0-2013-01 Issued: April 25, 2013

• NYSAR.com Legal Update Documents NEW SMOKE DETECTOR LAW New Smoke Detector Law • The bill was originally passed in June 2015 with an effective date of Jan. 1, 2017 • In February 2016, the law was amended by the Legislature with a new effective date of April 1, 2019 New Smoke Detector Law It shall be unlawful for any person or entity to distribute, sell, offer for sale, or import any solely battery operated smoke detecting alarm device powered by a replaceable, removable battery. All solely battery operated smoke detecting alarm devices that are distributed, sold, offered for sale, or imported, shall employ a non-removable, non-replaceable battery that powers the device for a minimum of ten years. NYSAR’s Original Interpretation • NYSAR News, January 3, 2017: “It should also be noted that the new law does not require all smoke detectors to be in compliance, just ones that are being installed or replaced on or after April 1, 2019.” New Smoke Detector Law • NYSAR Legal Update, January7, 2019: • The law DOES NOT apply to the transfer of property by sale or lease. • The law only applies to smoke detectors being distributed, sold, offered for sale or imported. • “Stream of commerce” type of transactions • Home Depot, Lowes, Walmart, Amazon etc. New Smoke Detector Law The provisions of this section shall not apply to solely battery operated smoke detecting alarm devices powered by a replaceable, removable battery that have been ordered by, or are in the inventory of, owners, managing agents, contractors, wholesalers or retailers on or before the effective date of this section. The provisions of this section shall not apply to smoke detecting alarm devices that receive their power from the electrical system of the building, fire alarm systems with smoke detectors, fire alarm devices that connect to a panel, devices that use a low-power radio frequency wireless communication signal, or such other devices as the state fire administrator shall designate through its regulatory process. New Smoke Detector Law • Nothing prohibits a licensee from recommending to the owner that they replace any removable battery smoke detectors with ones that comply with the new law to make the property seem more attractive to purchasers/renters • According to a number of reliable sources, the sensors in a smoke detector are effective for a maximum of 10 years NAR Code of Ethics Standard of Practice 1-7 Standard of Practice 1-7 When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/ landlord has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/19) Standard of Practice 1-7 • There is no NAR or NYSAR standardized form • Local Realtor boards/associations/MLS may have one already • There is no “required” language • Can be extremely simple or as complex as you want to make it Standard of Practice 1-7 • Licensees that provide affirmation must be truthful • Affirmation may be used against licensee if dishonest • DOS would be able to use affirmation against dishonest licensee • Breach of fiduciary duty to seller by not submitting offer • Possible self-dealing if in-house deal is accepted Standard of Practice 1-7 • Only seller can determine criteria for offers to be presented • Any required terms must be in writing from seller • “No offers will be submitted to seller if below $400,000” • “No offers will be submitted to seller without $10,000 deposit” Standard of Practice 1-7 • NAR will be voting to amend 1-7 to include a non-specific time requirement • “As soon as practicable”, “As soon as possible” • NAR will not vote to require a specific time (24 hrs etc.) • NYSAR Statewide Forms Committee drafted a form for use • Form will be released after NAR meetings in DC 5/13-5/18 NEW SEXUAL HARASSMENT LAWS New Sexual Harassment Law • Two components: Employee & Independent Contractor • The new law treats each category different Independent Contractors • Normally, sexual harassment policies only applied to employees • NYS sought to extend such protections to IC’s • Many business models rely upon IC’s as a major source of labor • The majority of our profession utilize IC’s • Brokers need to be aware of the new protections for IC’s • Effective NOW!!! Executive Law §296-d It shall be an unlawful discriminatory practice for an employer to permit sexual harassment of non-employees in its workplace. An employer may be held liable to a non-employee who is a contractor, subcontractor, vendor, consultant or other person providing services pursuant to a contract in the workplace or who is an employee of such contractor, subcontractor, vendor, consultant or other person providing services pursuant to a contract in the workplace, with respect to sexual harassment, when the employer, its agents or supervisors knew or should have known that such non-employee was subjected to sexual harassment in the employer’s workplace, and the employer failed to take immediate and appropriate corrective action. In reviewing such cases involving non-employees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of the harasser shall be considered. Sexual Harassment & Independent Contractors It shall be an unlawful discriminatory practice for an employer to permit sexual harassment of independent contractors in its workplace. An employer may be held liable to an independent contractor or an employee of the independent contractor, with respect to sexual harassment, when the employer, its agents or supervisors knew or should have known that such independent contractor was subjected to sexual harassment in the employer’s workplace, and the employer failed to take immediate and appropriate corrective action. In reviewing such cases involving non-employees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of the harasser shall be considered. Sexual Harassment & Independent Contractors • “and their employees” include • personal assistant(s) of a licensee • Personal assistant(s) of a Team • Brokers should also be prepared for employees of a licensee or Team that furthers the brokers business to be considered an employee of the brokerage if brought before NYS DoL or WCB • In such cases brokers office sexual harassment policy would be effective Sexual Harassment & Independent Contractors • “In reviewing such cases involving non-employees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of the harasser shall be considered.” • This sentence is an attempt to apply the theory of respondeat superior to IC’s • The level of control of the broker will be the determining factor • If similar to an employee, it will most likely apply Sexual Harassment & Employees • NYS passed comprehensive legislation addressing sexual harassment in the workplace • The new law requires all employers to have a sexual harassment policy that meets or exceeds one recommended by NYS • Employers are also required to provide sexual harassment training to all employees on a yearly basis • DoL and DHR are developing model policies and training • Comments received 9/12/18 Sexual Harassment & Employees • Effective 7/11/2018 • Prohibits confidentiality and/or non-disclosure agreements in settlement agreement unless requested by victim • Prohibits mandatory arbitration of sexual harassment claims*

* May be challenged as contrary to Federal Arbitration Act Sexual Harassment & Employees • Effective 10/9/2018 • Requires employer to have sexual harassment policy that meets or exceeds model policy • Policy must be distributed in writing to employees • Requires employer to provide interactive sexual harassment training that meets or exceeds model training • Training must be offered on a yearly basis (minimum) Sexual Harassment Policy for Employees • The policy must: • i) prohibit sexual harassment consistent with guidance issued by the Department of Labor in consultation with the Division of Human Rights; • ii) provide examples of prohibited conduct that would constitute unlawful sexual harassment; • iii) include information concerning the federal and state statutory provisions concerning sexual harassment, remedies available to victims of sexual harassment, and a statement that there may be applicable local laws; • iv) include a complaint form; Sexual Harassment Policy for Employees • The policy must: • v) include a procedure for the timely and confidential investigation of complaints that ensures due process for all parties; • vi) inform employees of their rights of redress and all available forums for adjudicating sexual harassment complaints administratively and judicially; • vii) clearly state that sexual harassment is considered a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisory and managerial personnel who knowingly allow such behavior to continue; and • viii) clearly state that retaliation against individuals who complain of sexual harassment or who testify or assist in any investigation or proceeding involving sexual harassment is unlawful. Sexual Harassment Training for Employees • The training must be interactive and include the following topics: • Include an explanation of sexual harassment consistent with guidance issued by the Department of Labor in consultation with the Division of Human Rights; • Include examples of unlawful sexual harassment; • Include information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims of sexual harassment; • Include information concerning employees’ rights of redress and all available forums for adjudicating complaints; and • Include information addressing conduct by supervisors and additional responsibilities for supervisors. ADVERTISING ON SOCIAL MEDIA What is an advertisement

•Promotion and solicitation related to licensed real estate activity, including but not limited to advertising via: • websites • e-mail • electronic bulletin boards • social media • apps

73 What is an advertisement???

•Anything done by a licensee where the intent is to promote your ability to provide licensed services as a means to solicit consumers to utilize those services

74 What is not an advertisement

• Commentary made by a duly licensed real estate salesperson, real estate associate broker or real estate broker that is not related to promoting licensed real estate activity. 175.25(a)(1)

• If you are talking about real property to a consumer utilizing the expertise you acquired as a licensee, it is most likely going to be classified as a licensed activity

75 19 NYCRR§175.25(c)(1)

• Only a real estate broker is permitted to place, or cause to be placed, advertisements. • Advertisements shall indicate that the advertiser is a real estate broker or provide the name of the real estate broker or real estate brokerage and either: i. the full address of the real estate broker or real estate brokerage or, ii. the telephone number of the real estate broker or brokerage.

76 Web based advertising

• Broker is responsible for the approval and supervision of all websites created and maintained by associated licensees where the purpose of the website is to promote a licensed activity in whole or in part. • Website also includes social media accounts used by associated licensees for the promotion of any licensed activity

77 19 NYCRR §175.25(d)(3)(b)

• Home page of each social media account shall include the information required by these rules and regulations (Brokerage name and address or phone #).

• In addition, a link to the broker or brokerage website with whom the associate broker, salesperson or team is associated is required on the homepage of the associate broker, salesperson or team social media account unless the broker or brokerage does not have a website.

78 19 NYCRR§175.25(c)(3)

•Real estate brokers, associate real estate brokers, and real estate salespersons shall advertise using the name under which said real estate broker, associate real estate broker or real estate salesperson is licensed with the Department of State. A nickname may be used in an advertisement provided that the full licensed name is listed clearly and conspicuously.

•THIS INCLUDES YOUR NAME ON SOCIAL MEDIA!!

79 19 NYCRR§175.25(c)(4)

•Advertisements shall correctly and accurately state the type of license held by the real estate broker, associate real estate broker or real estate salesperson named in the advertisement. Licensees may abbreviate the type of license held, provided that such abbreviation is not misleading. The use of the titles, “sales associate”, “licensed sales agent” or simply “broker” is prohibited. Real estate brokers, associate real estate brokers or real estate salespersons who have additional titles or designations are permitted to advertise such titles or designations.

80 License type DOS opinion

• DOS has issued opinion that the term ‘Licensed’ is not required before the type of license so long as it is clear the individual is a licensed real estate broker, associate broker or salesperson. • Required on home page of social media site.

81 Social Media-Personal page

82 Social Media-Business Page

83 Social Media

• (4) Registration and Account Security • (4) You will not use your personal timeline primarily for your own commercial gain, and will use a Facebook Page for such purposes.

• https://www.facebook.com/legal/terms

• 4/3/2017

84 No Sharing Without Permission

85 No Sharing Without Permission

86 How can I advertise property not listed with me?

• You are prohibited from “sharing” other brokers listings • Sharing the link for a listing via social media is the same as cutting and pasting the listing • Social media is the same as any print advertisement • IDX can only be used when the consumer inputs search parameters • You are prohibited from posting any IDX link to another brokers listing • GET PERMISSION!!!!!

87 How can I advertise property not listed with me?

• There is nothing prohibiting a group of brokers from starting a “group” where all members agree that other members are free to share their listings • “Group” must be open to all brokers or else there are antitrust/anticompetitive issues • It must be clear to all who join that: • Their broker approves of them joining • It is clear they are giving permission to share listings on social media

88 Code of Ethics Article 12

•REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional.

89 Standard of Practice 12-4

•REALTORS® shall not offer for sale/lease or advertise property without authority. • When acting as listing brokers or as subagents, REALTORS® shall not quote a price different from that agreed upon with the seller/landlord. (Amended 1/93)

90 Standard of Practice 12-5

•Realtors® shall not advertise nor permit any person employed by or affiliated with them to advertise real estate services or listed property in any medium (e.g., electronically, print, radio, television, etc.) without disclosing the name of that Realtor®’s firm in a reasonable and readily apparent manner either in the advertisement or in electronic advertising via a link to a display with all required disclosures. (Adopted 11/86, Amended 1/16)

91 Standard of Practice 12-5 DOS Opinion

• SoP 12-5 language “via a link to a display with all required disclosures.” is not permissible in NY. • 19 NYCRR§175.25(c)(1) requires all advertisement contain the name of the brokerage and their licensed address or main office phone #

92 Standard of Practice 12-5 DOS Opinion

• The Department of State interprets this section as a requirement that the information appear in the advertisement and the use of a link to do so is contrary to the regulation. • As such, the DOS opined that any licensee that relies upon the amendment would be in violation of the NYS Advertising Regulations.

93 Standard of Practice 12-5 DOS Opinion

• NYSAR inquired whether a “limited character” service like Twitter would be exempt because of the restriction on the number of characters that appear in a post and whether the use of the term “Broker” would be sufficient like the exception made for classified advertisements as set forth in 19 NYCRR §175.25(d)(1). • The DOS also stated that such sites are not truly a classified advertisement and as such, the amendment to SoP 12-5 is not applicable in New York under any condition.

94 Copyright

• Licensees are prohibited from using a copyrighted work without permission from the copyright holder • This includes photographs • If you didn’t take it, you need permission to use it • Presumptively the photographer owns the copyright • Seller’s do not own the photographs absent an agreement • Broker’s do not own the photographs absent an agreement

•

95 Copyright

• 19 NYCRR §175.25(b)(2)(c) • Photographs of property that are posted on a real estate broker’s website shall not be used or reproduced without written permission from the copyright holder of such photographs. • Website also applies to social media account •

96 Standard of Practice 12-10

•REALTORS®’ obligation to present a true picture in their advertising and representations to the public includes the URLs and domain names they use, and prohibits REALTORS® from: 1)engaging in deceptive or unauthorized framing of real estate brokerage websites; 2)manipulating (e.g., presenting content developed by others) listing content in any way that produces a deceptive or misleading result; or 3) deceptively using metatags, keywords or other devices/methods to direct, drive, or divert Internet traffic, or to otherwise mislead consumers.

97 Use of the term REALTOR®

•First and foremost, use of a REALTOR® mark can only be acceptable if it is authorized. Members or member boards of the National Association of REALTORS® are authorized to use the REALTOR® marks only in connection with their real estate business. Individuals or entities that are not members of NAR are prohibited from using the REALTOR® marks in their domain names or usernames.

98 Use of the Term REALTOR®

• Authorized uses of REALTOR® Marks in usernames of members are acceptable only • if used with the member’s name or firm name; and • if not used with descriptive words or phrases.

99 Permissible use of REALTOR®

• The use of the term REALTOR® should ONLY be used to indicate membership in the REALTOR® association • Jonathon Galt, REALTOR® • Spindrift Realty, REALTOR®

100 Permissible use of REALTOR®

• The term REALTOR® was created by a member to identify members and distinguish them from non-members. When the REALTOR® marks are used with a descriptive word or phrase it does not identify a person as a member but is most likely to be understood to be referring to a type or service that might be provided.

101 Prohibited use of REALTOR®

• You may not include geographical term modifying the term REALTOR® • “Plattsburgh-area REALTOR®” • “Upstate REALTOR®” • “North Country REALTOR®”

102 Prohibited use of REALTOR®

• You may not contain descriptive terms that modify the REALTOR® mark • “Number One REALTOR®” • “Top REALTOR®” • “Your REALTOR®” or “Your ______REALTOR®”

103 Usernames and REALTOR®

• Usernames may not contain descriptive terms that modify the REALTOR® mark • Realtorsellshomes • No_fee_realtor • Use_a_realtor • Worlds_greatest_realtor

104 Usernames and REALTOR®

• Usernames may not include geographical term modifying the term REALTOR® • Clintonrealtor • Champlainrealtor • realtor_ny • Uptown_realtor

105 Usernames

• Usernames should not be misleading to the public • Usernames that appear to project a brokerage may be contrary to Article 12-A • Gattorealestateco • Nofeebroker (when there is a fee) • 3percentcommission (I don’t know where to start!!) • Try to use a name that is as close to your licensed name if using it for advertising.

106 Troublesome posts

• Should not attack or threaten other people/entities • False statements about people or their businesses • Information about a transaction that are protected by fiduciary duties or Article 12-A • Discussions of commissions and splits or business models (UGH!!!!!!!) • Mixing personal and business posts • Providing information to a consumer represented

107 Troublesome posts

• Blind or stealth advertisements (sponsored or click through) • “Plattsburgh area real estate deals” • “Lake Champlain Real Estate Resource” • “What’s your home worth in Albany?” • It doesn’t matter if it’s a personal, business, group, community or other type of page.

•

108 Troublesome posts

• Limited character social media sites • NAR provides exception in SoP 12-5 • DOS may not agree with DOS exception • DOS may look at Twitter as being similar to a classified advertisement • 19 NYCRR §175.25(d)(1) indicate that the advertiser is a real estate broker or brokerage; or provide the name of the real estate broker or real estate brokerage…may omit the license type.

109 Be careful what you share with consumers

If they weren’t your “friend” before the transaction, they shouldn’t become your “friend” during the transaction

110 DOS ENFORCEMENT OF WEBSITES: LICENSE TYPES AND CORPORATE TITLES 12

Advertising Regulations

• 19 NYCRR §175.25 • All types of advertising including: • Print media • Websites • Social Media • Any application 13

What is an Advertisement?

Anything done by a licensee where the intent is to promote your ability to provide licensed services as a means to solicit consumers to utilize those services 14

Names 19 NYCRR§175.25(c)(3)

Real estate brokers, associate real estate brokers, and real estate salespersons shall advertise using the name under which said real estate broker, associate real estate broker or real estate salesperson is licensed with the Department of State. A nickname may be used in an advertisement provided that the full licensed name is listed clearly and conspicuously. 15

Names 19 NYCRR§175.25(c)(3)

• Licensees may omit their middle initial or middle name so long as doing so is not misleading to the public • Use of a nickname is permitted in addition to your full licensed name • Last names must reflect what is printed on your license Permitted Display of Nicknames • Robert “Bob” Smith • Robert (Bob) Smith • Robert Bob Smith • Robert Smith, “Call me Bob” 17

Changing Your Name

• The DOS does not permit a licensee to change the name that appears on their license unless they are legally permitted to use the name • To change your first name, you need a court order. You can’t change your license to your nickname without it. • To change your last name you need to show you have the legal right to use the last name (divorce decree, marriage certificate, etc.) 18

License Type 19 NYCRR§175.25(c)(4)

Advertisements shall correctly and accurately state the type of license held by the real estate broker, associate real estate broker or real estate salesperson named in the advertisement. 19

DOS Issues 3 Licenses Licensed Real Estate Broker Licensed Real Estate Associate Broker* Licensed Associate Real Estate Broker* Licensed Real Estate Salesperson *DOS permits the use of either 20

License Type DOS opinion

• DOS has issued opinion that the term ‘Licensed’ is not required before the type of license so long as it is clear the individual is a licensed real estate broker, associate broker or salesperson. • The term “Licensed” may be abbreviated as “Lic” 21

Display of Broker License Type Licensed Real Estate Broker Lic. Real Estate Broker Licensed RE Broker Lic. RE Broker RE Broker 22

Display of Associate Broker License Type Licensed Real Estate Associate Broker Lic. Real Estate Associate Broker Licensed RE Associate Broker Lic. RE Associate Broker RE Associate Broker “Associate” may be abbreviated as “Assoc” 23

Display of Associate Broker License Type Licensed Associate Real Estate Broker Lic. Associate Real Estate Broker Licensed Associate RE Broker Lic. Associate RE Broker Associate RE Broker “Associate” may be abbreviated as “Assoc” 24

Display of Salesperson License Type Licensed Real Estate Salesperson Lic. Real Estate Salesperson Licensed RE Salesperson Lic. RE Salesperson RE Salesperson 25

License Type 19 NYCRR§175.25(c)(4)

Licensees may abbreviate the type of license held, provided that such abbreviation is not misleading. The use of the titles, “sales associate”, “licensed sales agent” or simply “broker” is prohibited. 26

License Type 19 NYCRR§175.25(c)(4)

Real estate brokers, associate real estate brokers or real estate salespersons who have additional titles or designations are permitted to advertise such titles or designations*

*Such titles or designations must be “earned” 27

Earned Designations

• GRI, SRES, ABR, SRS, MRP, CIPS • An earned designation is one where a licensee could have attended a class, completed coursework or some other type of activity to qualify for the designation • Merely writing a check for a title may not be in compliance 28

What About “Premier Agent”

• DOS is currently in the process of drafting guidance on how to comply with the advertising regulations. • The use of “Premier Agent” will be addressed in the guidance letter. • DOS will put a grace period in place for all licensees to become compliant. • Somewhat suspect as it is not “earned” Corporate Titles

• Real Property Law §441-b(2) prohibits associate brokers and salespersons from being a corporate officer • DOS opinions 4/26/13 and 8/20/2013 clarify prohibition Real Property Law §441-b(2)

No license as a real estate salesperson shall be issued to any officer of a corporation nor to any manager or member of a limited liability company nor to a member of a co-partnership licensed as a real estate broker. Real Property Law §440(2)

…however, that the practice of real estate sales and brokerage by such individual as an associate broker shall be governed exclusively by the provisions of this article as they pertain to real estate salespersons But I’m RE Associate Broker!!

Licensed Real Estate Associate Brokers are NOT a broker for the purpose of corporate titles. DOS Opinion 4/26/2013

“references to salesperson, such as that found in 19 NYCRR 175.22, include by extension associate brokers who, in accordance with Real Property Law section 440(2), have elected to work under another broker’s name and supervision.” Corporate Titles

• Unless you are a Licensed Real Estate Broker with the firm, you are unable to use any corporate titles. • The only title that may be used is “Office Manager” licensed pursuant to Real Property Law §440(6) What are Corporate Titles?

President, Vice President, Senior Vice President, Executive Vice President, Treasurer, Secretary, Director, Managing Director, Executive Director, Manager (unless Office Manager pursuant to Real Property Law §440(6)) What are Corporate Titles?

“Any title which implies that an associate broker or real estate salesperson in involved in the management, supervision and control of the brokerage company would be prohibited.” (DOS opinion 8/20/13) Commercial or Team Corporate Titles

• There is no exception merely because the licensee practices commercial real estate or is a member of Team. • Examples: Team President, Team Manager, Vice President of Team Marketing, Director of Commercial Leasing Broker Liability

Brokers that permit the use of improper license types/titles or corporate titles contrary to the opinion of the DOS would be subjecting themselves to liability for violating the Real Property Law. CERTIFICATE OF OCCUPANCY DISCLOSURE IN ALL LEASES OF 1-3 FAMILY PROPERTIES Real Property Law §235-bb • On November 29, 2017 a new section of the Real Property Law came into effect • Real Property Law §235-bb addresses lease requirements for 1-3 family properties

140 Real Property Law §235-bb Leases of units in a 1-3 family property requires the owner to include in every lease entered into after 11/27/2017 includes conspicuous notice in bold face type as to whether a certificate of occupancy (if such certificate is required by law) is currently valid for the dwelling unit subject to the lease or rental agreement.

141 Real Property Law §235-bb An owner may provide the tenant with a copy of the valid Certificate of Occupancy instead of providing the notice in the lease. Owner’s that do so “shall be deemed to have complied with the requirements of this subdivision.”

142 Real Property Law §235-bb If the lease (or any other document) contains an agreement whereby the tenant waives their right to receive such notice, the waiver is deemed to be void as it is contrary to public policy

143 Real Property Law §235-bb Licensees acting as a Landlord Agent or Property Manager for properties with 3 or less rental units that supply leases to prospective tenants may be held liable by DOS for non- compliance.

144 Real Property Law §235-bb. Certificates of occupancy; required disclosure to tenant. 1. Prior to executing a residential lease or rental agreement with a tenant, the owner of real property consisting of three or fewer rental units shall provide conspicuous notice in bold face type as to whether a certificate of occupancy, if such certificate is required by law, is currently valid for the dwelling unit subject to the lease or rental agreement. Owners who provide the tenant with an actual copy of the valid certificate of occupancy shall be deemed to have complied with the requirements of this subdivision. 2. Any agreement by a lessee or tenant of premises for dwelling purposes waiving or modifying his or her rights as set forth in this section shall be void as contrary to public policy.

145 Real Property Law §235-bb Memo Some tenants may assume that when a landlord is offering a place to rent, that those housing accommodations are safe and up to code. However, that isn't necessarily the case. In fact, some landlords are seeking additional profits by allowing more tenants into a house or building than would otherwise be allowed. For example, a landlord may take a two-family house, which was once only home to two families, and instead make illegal conversions inside the two-family house such that five or six families are living there.

146 Real Property Law §235-bb Memo These illegal conversions present not only the obvious concerns of the safety of those individuals living there, but they also cause our neighborhoods and schools to become overcrowded because our city planners are assuming that a two-family house only has two families in it, and not five or six. This bill would protect tenants by requiring landlords to disclose whether a certificate of occupancy is on file, if the building is required to have one, for the property being rented and that it is valid. Alternatively, landlords could provide a copy of the certificate of occupancy to the tenants.

147 Real Property Law §235-bb Memo Any broker or brokerage that provides blank leases for rental transactions should have those leases reviewed by an attorney for compliance purposes.

Furthermore, any simple fill in the blank lease filled out by a licensee should contain an attorney approval clause pursuant to Duncan & Hill Realty v. Dep't of State.

148 COMING SOON Coming Soon Listings

• Real Property Law § 441-c(1)(a) licensees are prohibited from placing misleading and/or untruthful advertisements • Use must be truthful and at seller’s legitimate request • Not an alternative marketing technique • Not to be used to compile list of buyers • The “new” pocket listing

150 Coming Soon Listings

• All brokers must be given same access as listing office. • Do not ‘suggest’ the use of a Coming Soon listing unless Sellers circumstances specifically warrant it.

151 Coming Soon Listings

• “Coming Soon is a great marketing tool because it creates an interest in the property during the Coming Soon period and on the first day it hits the MLS, we have the names of a large number of interested buyers and we get a contract in the first day or two so you won’t have every buyer coming through your home”

152 Coming Soon Listings

Brokers that use Coming Soon listings should have some type of agreement to protect their potential for commission in the event the owner sells the property during the Coming Soon period. Brokers must comply with all MLS rules relating to the reporting of listings and listing agreements

153 Coming Soon Listings

Brokers need to be aware as to how their associated licensees are using Coming Soon listings. If the licensee is doing so in order to increase their chance of getting “both sides” of the transaction, that is “self-dealing” and is a violation of fiduciary duties as the licensee is putting their needs over that of the client

154 Coming Soon Listings

If Coming Soon listings are subsequently placed in MLS as “pending” or “in contract” it is highly suspect that they are being done improperly, just like a pocket listing

155 NANNY CAMS AND EAVESDROPPING 157

Eavesdropping-Penal Law

§250.00(2) “’Mechanical overhearing of a conversation means the intentional overhearing or recording of a conversation or discussion, without the consent of at least one party thereto, by a person not present thereat, by means of any instrument, device or equipment.” 158

Eavesdropping-Penal Law

§250.05, sets forth the crime of “eavesdropping” where “a person is guilty of eavesdropping when he unlawfully engages in wiretapping, mechanical overhearing of a conversation, or intercepting or accessing of an electronic communication.” 159

Eavesdropping-Penal Law

• Audio recording is a crime unless the person recording the conversation is a participant in the conversation. • Sellers are prohibited from using audio recording unless seller is a part of the conversation or the other party has been notified and consented 160

Eavesdropping-Penal Law

• Licensees who are aware of sellers intending to use audio recordings must warn seller not to do so • Licensees MUST advise all cooperating brokers and consumers if seller is using audio recordings and receive their written consent to be recorded 161

Eavesdropping-Penal Law • Home security cameras • Nanny cams • Doorbells • Webcams • Amazon Echo, Ring • Google Home, Nest • Etc. 162

Eavesdropping-Penal Law

• Class E Felony • Violation of license law if not disclosed • Recent case law supports privacy • Licensees should not record their own clients as it may be seen as a breach of fiduciary duties (no caselaw) • The use of video recordings is permitted and is not required to be disclosed for security purposes RECENT DECISIONS OF INTEREST Commissions DvF • SDNY 1/24/19 • Broker initiated suit against purchaser • Broker claims entitlement to 6% of the purchase price • Broker alleges: • breach of contract against purchaser • tortious interference against other broker that received commission Commissions DvF • 12/2016 Representative of purchaser, F, contacted broker D • F wanted assistance from D in purchase of a particular townhouse • D introduced F to a different townhouse • Over next 2 months D took steps to facilitate a sale • made detailed showing of property • measured property with a laser • introduced F to owner • provided blueprints to F Commissions DvF • No further contact after 2/2017 • 10/2017 property closes for $18 million and another broker E gets commission • D initiates lawsuit against F for breach of contract and against broker E for tortious interference with contract Commissions DvF • Both claims by D require there to be a valid contract • “few principles are better settled…than the requirement of definiteness” which states that “if an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract” • “A mere agreement to agree, in which a material term is left for future negotiations, is unenforceable” Commissions DvF • In the case of compensation, a term qualifies as insufficiently definite “where the amount cannot be determined objectively without the need for new expressions by the parties” • “Compensation may be calculated “with reference to industry standards or customs” but in that case “the plaintiff must establish that the omitted term is fixed and invariable in the industry in question” Commissions DvF • Broker D needed to prove an enforceable contract • D only provided “informal email” • This is to confirm that we F are working with you solely regarding the viewing and any other needs at 123 XYZ St. There will not be any other lines of communication outside of myself. Thank you and please let me know if you need anything further. Commissions DvF • Court deemed email was insufficient to show: • Agreement to use D exclusively for purchase • Agreement to pay D a 6% commission

• “A contract giving rise to an exclusive right to sell must clearly and expressly provide that a commission is due upon sale by the owner..” • The email is nothing more than an unenforceable agreement to agree Commissions DvF • Email does not contain material terms of a real estate brokerage agreement, including the scope and duration of the relationship and fee • Broker D was not entitled to the commission of $1,080,000 Commissions NvB • NYS Appellate Division, 2nd Dept. 12/2018 • Broker, N, initiated action against homeowner B for commissions • Claim is based on exclusive brokerage agreement between N & B Commissions NvB • NYS Appellate Division, 2nd Dept. 12/2018 • Broker, N, initiated action against homeowner B for commissions • Claim is based on exclusive brokerage agreement between N & B • Property was leased as “Summer Rental” Commissions NvB • B was the owner of property that was leased to S • N negotiated the lease between B and S • Initial lease was for 1 month in 2010 • N & B entered into exclusive brokerage agreement at that time Commissions NvB • Agreement provided for: • Commission on 2010 lease and extensions • Commission on all future leases and renewals • Commission if S ever purchases property • The agreement did not have an end date Commissions NvB • S leased property for 1-2 months in 2011, 2012 and 2013 • N negotiated the subsequent leases as well • No new brokerage agreement was entered into between 2011-2013 • S leased directly from B in 2014 without any broker • N was told of lease and did nothing to collect commission Commissions NvB • S purchased property from B in 2015 without N’s involvement • N filed suit against B &S • Lower court ruled in favor of N and awarded commissions • B appealed Commissions NvB • “A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” • “The threshold question of whether a contract is unambiguous, and the subsequent construction and interpretation of an unambiguous contract, are issues of law within the province of the court” • “Where a brokerage agreement contains no term as to its duration, a reasonable duration must be implied” Commissions NvB • 2010 agreement provided that N was due a rental commission for the lease and any renewal/extension • N would also receive commission if sold to S during the term of the 2010 lease or any extension/renewal Commissions NvB • S rented property 1-2 months in the summer • S would leave premises at end of lease • S would enter into new leases for subsequent years • S did not enter into any extension/renewal • B entered into other leases for same property • B & S negotiated 2014 lease without N • B & S negotiated sale without N Commissions NvB • Appellate court reversed lower court decision • 2010 lease was not renewed or extended • 2010 agreement expired upon termination of 2010 lease term • Agreement was not valid or enforceable after end of 2010 lease Commissions NvB • Appellate court reversed lower court decision • 2010 lease was not renewed or extended • 2010 agreement expired upon termination of 2010 lease term • Agreement was not valid or enforceable after end of 2010 lease • N not entitled to commissions for subsequent leases and purchase Lease RvC • Cohoes City Court (11/2018) • C and husband leased premises from R • Lease contained a “joint and several” liability clause Lease RvC • After moving in, husband was abusive towards C • Husband threatened to kill C, her child and unborn child • C moved out with child and resided with family Lease RvC • C petitioned Family Court for an Order of Protection • Order of Protection granted against husband • R sued C and husband for unpaid rent remaining on lease Lease RvC RPL §227-c (2007), authorizes victims of domestic violence for whose benefit an order of protection has been issued, to terminate a lease or rental agreement covering premises occupied for dwelling purposes and to be released from liability thereunder. Lease RvC • C was not represented by counsel in the non-payment proceeding • C failed to plead protection afforded by RPL 227-c • Court unable to give C the benefit given by 227-c • Court found other legal justification removing liability from C Lease RvC • Court found that common law still applied • Court applied the common law doctrine of unconscionability applied Lease RvC “R asks this court to hold C responsible for $3,498 of rent arrears pursuant to the joint and several liability clause of the lease. The court will not do so. A woman who is a victim of domestic violence should not be forced to pay the rent of her abuser. To sustain the contrary proposition, as Riverwalk seeks, would be shockingly unjust and unfair which is the very definition of an unconscionable act. Therefore, the court holds the joint and several liability clause, as applied to the facts in this case, is unconscionable and thus void as to C” DOS Decision DOSvER • ER renewing salesperson license • DOS denies renewal for violating RPL and NYCRR based on 2012 investigation • Alleged that ER accepted fees directly from consumer • Alleged ER kept fees and comingled money • Alleged ER did not return deposit to consumer • ER was not a broker DOS Decision DOSvER • ER accepted check from BF for “Security Deposit” • ER deposited check into personal account • Broker unaware of ER’s actions when contacted DOS Decision DOSvER • ER admitted depositing check in own account • Claimed landlord “refused to work with broker” of ER • ER claims BF wrote check to ER by mistake • ER felt justified keeping money • Because landlord did not want to do business with ER’s broker • ER claims to have done “all the work” and deserved fee • Offered broker $600 and broker terminated ER • Showed check to landlord and said would keep it as fee and landlord agreed DOS Decision DOSvER • ER denied telling tenant to write “Security Deposit” or put ER’s name on check • ER admitted broker was unaware of transaction • Only offered money to broker after BF complained DOS Decision DOSvER • “I know for sure it wasn’t all 100 percent…how it was supposed to be done” but ER was “trying to make everything OK again” • “This was wrong for me to accept it, but the fact that I accepted it and tried to do my good faith in distributing it, that should be the main point” • “it wasn’t the right thing to do at the time…I know the knowledge of real estate enough to know that I’m not supposed to-even if it has it in my name, if this was to go directly to me, I know for sure that’s not doing something in good faith” DOS Decision DOSvER • ER admitted converting the money for his own personal use • ER claimed he has grown up since this occurred and deserves to be licensed as a salesperson • DOS disagreed AGENCY: DUAL AND DESIGNATED AGENCY Dual/Designated Agency and Informed Consent • Is merely presenting the Agency Disclosure Form (ADF) enough to show informed consent? • Do you think a seller/buyer/landlord/tenant understands dual/designated from the information provided on the ADF? • View of NYS Legislature different • Negotiations for Advanced Consent focused on informed consent That’s why we call them… • “Advanced Informed Consent to Dual Agency” • “Advanced Informed Consent to Dual Agency with Designated Sales Agents” • Informed consent is a required component of agency disclosure • Informed consent is not achieved solely with the ADF Citing the Agency Disclosure Form “An agent acting as a dual agent must explain carefully to both the buyer and seller that the agent is acting for the other party as well. The agent should also explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and seller are giving up their right to undivided loyalty.” Goldstein v. Houlihan Lawrence (Westchester County 4/17/2019) How Do I Comply? • NYSAR has drafted forms to meet the “informed consent” requirement • Each form is 2 pages in length • Explains all pros and cons of dual/designated • Licensees should review forms as well • Discloses what can and cannot be done Where are the forms? • NYSAR has a Statewide Forms Library • Available through zipForms • http://www.zipformplus.com • Free account with NAR membership NYSAR Best Practice • For EVERY dual or designated agency scenario have the consumer sign the NYSAR forms in addition to the ADF. • Provide a copy of the NYSAR forms to consumer to keep and put signed copy in folder Future of Dual Agency • Recent movement to abolish dual agency • British Columbia abolished dual agency • Single agent more problematic • No legislative push to abolish at this time COURT/DOS AGENCY DECISIONS NvJ • NYS Appellate Division, 4th Dept. 7/2018 (SMJ) • N was owner of properties and wanted to sell • N retained broker to list properties • N agreed to sell properties to purchaser NvJ • Prior to closing, N filed lawsuit against broker • N claims broker breached fiduciary duty • N claims purchaser induced broker to breach fiduciary duty • N claims purchaser and broker conspired to defraud N into selling properties “for far below market value” NvJ • Broker filed counterclaim for commission on sale of property at $4,400,000 • Broker denies any breach of fiduciary duty or conspiracy with purchaser NvJ • To state a claim for breach of fiduciary duty, a plaintiff must allege that the broker owed a fiduciary duty, that the broker committed misconduct, and that N suffered damages caused by that misconduct • It is well settled that a real estate broker is a fiduciary with a duty of loyalty and an obligation to act in the best interests of the principal • There is thus no dispute that broker owed N a fiduciary duty. NvJ • It is well settled that, because of a broker's fiduciary duties, broker has the affirmative duty not to act for a party whose interests are adverse to those of the principal, unless consent of the principal is given after full knowledge of the facts • A broker cannot act as agent for both seller and purchaser of property in a real estate transaction • Where a broker's interests or loyalties are divided due to the representation of multiple parties, the broker must disclose to the principal the material facts illuminating the broker's divided loyalties • Failure to disclose any interest tending to influence the broker constitutes a breach of fiduciary obligation and precludes broker from recovering for services rendered NvJ • N submitted multiple emails between broker and purchaser as evidence • In one email, broker discussed boxing N into a corner to force N to make a deal to sell the properties for substantially less than broker had opined that they were worth • Thus, despite his representation of N, broker clearly aligned himself with purchasers interests in those emails, as demonstrated by broker’s use of the pronouns "we" and "our" when discussing with purchaser the plans to deal with N • For example, broker proposed to purchaser that it pays a certain sum for the properties, and that "we” will make a deal with N at that number • Broker also suggested to purchaser what "our” message to N should be. • Broker even complained to purchaser that N was stringing “us” along NvJ • It was also noted that broker suggested that purchaser should consider purchasing other property • Broker asked purchaser if they would consider other property as an alternative to N’s property NvJ • Court found that in such a situation broker would be considered a dual agent with a duty to disclose its divided loyalties and obtain consent • The court found no such dual agency disclosure was ever made • The court found there were triable issues of fact as to whether broker breached fiduciary duties to N and as such, would not have been entitled to a commission LvS • Supreme Court, New York County, 9/2018 • Potential purchaser (PP) wants to do a 1031 exchange • Broker signed exclusive agreement with potential purchaser (PP) LvS • PP would refer to broker all inquiries, proposals, and offers that it received, made, or intended to make regarding any property in the City of New York…and PP agrees…to advise all persons of this exclusive right with broker • The agreement calls for a commission to be paid at closing • Agreement also requires payment if PP works with another agent or directly with seller while excluding current broker LvS • Any property introduced to PP before January 31, 2016 will be covered by the exclusive agreement for one additional year, until January 31, 2017. • Agreement has “loser pays” clause LvS • On 7/21/2015 PP closed on a property without broker’s knowledge • PP used another broker to find property • PP refused to pay broker under exclusive agreement • PP claims broker told him agreement would not apply to property that was purchased because PP found property before agreement signed LvS • PP also claims broker fraudulently induced PP to enter into agreement • PP claims broker breached fiduciary duty by 1. Making property subject to agreement 2. Failing to disclose referral agreement with other brokers for properties LvS • “a brokers duty to refrain from taking any action adverse to its principal’s interests is necessarily tied to the transaction that formed the agency relationship in the first instance” • PP failed to allege any facts to show broker referral arrangement was wrongful or an action adverse to PP • PP failed to show any damages that resulted due to referral • Broker awarded $615,000 w/ interest from 7/22/2015 • Broker entitled to attorney fees as prevailing party LvS • The court determined that the language of the agreement was clear and unambiguous • Agreement “must be enforced pursuant to the plain meaning of its terms” • Agreement is clear that broker is entitled to commission ZvD • Appellate Division 1st department • Z was broker • Z sued D for commissions on the sale of D’s property • Z was initially a seller’s agent • Motion court found Z was also a buyer’s agent ZvD • Z failed to disclose dual agency • “engaged in an impermissible dual agency without full disclosure” • “Where, as here, the duty of undivided loyalty is breached, plaintiff broker forfeits its right to a commission” • Undisclosed dual agency will lead to the forfeiture of any claim for commissions • DOS has same policy for disciplinary actions MvD

• Sup Court New York County 9/2016 • Listing broker sued for commission on sale of Coop • Also listing agent for adjacent unit (not disclosed to client) • Contract accepted is contingent on both units closing • Seller closed but did not pay MWA claiming breach of FD

222 MvD

• Seller claims “dual representation” (Sonnenschein) • "in the absence of an agreement with a principal to the contrary, a broker owes no duty to refrain from offering the properties of all its principals to a prospective customer…change a broker's interest in doing anything but sell both properties at as high a price as is attainable considering the market, in order to maximize the broker's commissions earned.”

223 GvA

• Appellate Division 2nd Dept. 12/2013 • Action for commission by broker • Broker had buyer sign Dual Agency on form • Seller offered property as FSBO • Advertisement stated “No Brokers”

224 GvA

• Broker gave seller Agency Disclosure form to sign • ADF had “Dual Agent” checked off • Seller refused to sign disclosure form • Broker provided a commission agreement for $10,000 to be paid by seller • Seller did not sign commission agreement

225 GvA

• Property under contract • “Seller shall pay broker any commission earned pursuant to a separate agreement between seller and broker” • Lower court ruled in favor of seller • Dual agency not signed, advertisement stated “No brokers” and seller had no intent to hire an agent

226 GvA

• Appellate court disagreed with lower court • Our issue is agency, not commissions • Did seller agree to Dual Agency if they refused to sign the form and indicated “No Brokers” • Why did agent have buyer sign Dual Agency?

227 California-Dual Agency

• Horiike v Coldwell Banker

• As a dual agent whether the associate licensee owed to the buyer a duty to learn and disclose all information materially affecting the value or desirability of the property, including the discrepancy between the square footage of the residence‘s living area as advertised and as reflected in publicly recorded documents.

228 California-Dual Agency

•2079. (a) It is the duty of a real estate broker or salesperson, licensed under Division 4 (commencing with Section 10000) of the Business and Professions Code, to a prospective purchaser of residential real property comprising one to four dwelling units, or a manufactured home as defined in Section 18007 of the Health and Safety Code, to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal, if that broker has a written contract with the seller to find or obtain a buyer or is a broker who acts in cooperation with that broker to find and obtain a buyer.

229 California-Dual Agency

• New York only requires licensees to “deal honestly, fairly and in good faith.” (RPL 443) • There is no requirement in NY like in California to make a thorough inspection. • This does not absolve a licensee from making a good faith effort to verify such information • DOS uses the “known of should have known” basis • For more information see the Illegal Property DOS Opinion

230 DOS Decisions AD • D was a lic. RE Salesperson with brokerage • D advertised studio apt on Craigslist • Consumers contacted D about apt. • D showed consumers apt. • Consumers entered lease paid commission directly to D • Consumers began cleaning the apt. and disposed of a number of small appliances left in the kitchen • LL notifies consumers it is a shared kitchen DOS Decisions AD • D was aware of shared kitchen at all times • D never disclosed shared kitchen at any time • Consumers brought officials to apt. for violations • Apt. found not to have a proper Cert. of Occupancy • LL returned rent and security to consumers • D refused to return commission • D listed as “LICENSE(sic) REAL ESTATE BROKER” on business card even though only a salesperson DOS Decisions AD • D breached fiduciary duties and was untrustworthy • Directly collecting a commission untrustworthy & incompetent • Identifying as broker untrustworthy & incompetent • Broker not liable for failure to supervise if “broker has no reason to be aware that the salesperson is engaging in any sales activity, it cannot be said that the broker failed to meet his supervisory obligations” • D had license revoked and ordered to pay back commission DOS Decisions RG/PG/PR • RG was licensed as an individual broker • RG formed an LLC “PG, LLC” with DOS, Div. of Corp. • “PG, LLC” was never licensed as an LLC RE Broker with DOS DOS Decisions RG/PG/PR • RG was convicted of petit larceny related to failure to return escrowed funds • RG had 4 different consumers file DOS complaints against him DOS Decisions RG/PG/PR • RG claims he was “burned many times” for rental commissions • RG collects commission and deposits up front • RG gives deposit to LL and keeps commission in his account • RG admits to not having an escrow account • If transaction cancelled and LL doesn’t refund deposit, RG can only refund commission DOS Decisions RG/PG/PR • It is also alleged that: • RG did not provide agency disclosure • RG operated under unlicensed broker names (PG, LLC & PR, LLC) • Comingled escrow funds DOS Decisions RG/PG/PR • RG claims he provided consumers with agency disclosure but failed to retain copies for his file • RG claims he did not operate under either LLC • RG has business cards with LLC entity listed • RG admitted in prior testimony he operated under LLC’s • RG stated he used some escrow funds for personal expenses DOS Decisions RG/PG/PR • DOS found RG violated agency disclosure by failing to retain completed forms for 3 years • RG was untrustworthy operating under unlicensed name • RG failed to maintain escrow account, comingled funds • RG failed to return escrow funds • Breach fiduciary duties, gross incompetence, untrustworthiness • “Respondent’s misconduct is egregious…therefore revocation of his license is warranted” DOS Decisions FR • S contacted F and asked that listing be removed • F denied ever listing property • F later responded to S’s demand a derogatory acronym • F denies knowing what derogatory acronym means or why it was included in response to S DOS Decisions FR • “tribunal is unable to accept…a person of…normal intelligence does not know the meaning of what he wrote, and can only conclude that he is trying to conceal something which is not to hiss advantage.” • F lied to DOS investigators • F had broker’s license suspended for 3 months Legal Hotline Monday-Friday 9:00a.m.-4:00p.m. 518-436-9727