Pocket Listings Are Not New, but As of Late, They Have Become More Common
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Legal Corner The RANM Annual Conference Legal Update . What You Missed ¡ ¢ £ ¤ ¥ ¦ § ¨ ¡ § © § ¡ ¡ £ § ¡ ¨ § © ¡ ¨ ¤ ¡ “Pocket” Listings - BEWARE £ § £ £ § © ¨ ¨ ¡ § £ ¤ ¥ ¦ ¨ ¡ ¤ ough not a legally de"ned term, a “pocket”, “o%-MLS”, or “On-Waiver” ¡ listing generally refers to a listing taken by broker that has not and will not be placed in the multiple listing service (MLS). listing out of the MLS, the broker or Pocket Listings are not new, but as of late, they have become more common. the seller? And did the broker fully While pocket listings are not per se illegal, REALTORS® must be aware of the explain to the seller that the broker potential for liability and consider several other issues. would not be sharing compensation and what that means to the seller? First, MLS Rules typically require that listings be entered into the MLS within a certain period of time after the listing agreement has been fully executed be- In addition to MLS and Code of tween the broker and the seller, generally 48 hours. Ethics concerns, there may be legal liability for the broker who doesn’t If the listing is not going to be entered within that time frame, typically, the properly handle a pocket listing. MLS Rules will require that the broker submit an MLS/Seller Waiver Form or its equivalent within some speci"ed period of time. In the MLS/Seller Wavier Brokers working in a transaction- Form, the seller, by his/her signature thereto, acknowledges the bene"ts of the broker relationship owe broker duties. MLS and elects not to have the listing entered into the MLS. Included in those broker duties are the duty to exercise reasonable care, to Failure of a broker to enter the listing or submit honor all written agreements a Seller/MLS Waiver Form within the required On the Current Legal the broker has with her cli- period of time may result in the broker incurring ent/customer and to be hon- a "ne for violation of the MLS Rules. Issues Radar Screen: est with his customer/client. Pocket Listings, Secondly, the broker needs to be aware the follow- If brokers are acting in an ing applicable Code of Ethics provisions: Article 1 Independent agency capacity, they owe of the Code of Ethics requires REALTORS® to additional duties, those of a “promote and protect the interests of their clients” Contractor Status, "duciary, to their client which and Standard of Practice 1-12 speci"cally requires and More! requires the broker to put a REALTOR® to discuss with the seller his/her the interests of his/her client policy regarding cooperation and the amount(s) of any compensation that will above those of his/her own. be o%ered. So, could a pocket listing violate ei- Article 3 of the Code of Ethics places on the REALTOR® a duty to cooperate ther broker duties or "duciary duties? with other brokers and Standard of Practice 3-10 states that the “duty to coop- If the listing is kept out of the MLS erate . relates to the obligation to share information on listed property and to for the bene"t of the broker, and not make property available to other brokers for showing to prospective purchasers/ for the bene"t of the seller and/or at tenants when it is in the best interest of sellers/landlords .” the seller’s request, then the answer is yes. In short, the seller must make the ese provisions beg the question: Who is making the decision to keep the continued on page 6 RANM REALTOR® Voice | Third Quarter 2014 | Page 5 If your MLS’s MLS/Seller Wavier Legal Update Form does not detail the bene"ts continued from page 5 of the MLS, the broker may utilize decision to keep the listing out of the MLS, not the broker , and the seller’s deci- RANM’s newly released MLS Infor- sion must come only after the seller has been fully informed of the bene"ts of mation Sheet, RANM Form 1820. the MLS. Lastly, broker liability can arise if the broker has agreed in the listing agreement to place the property in the MLS and then fails to do so; this may be #e MLS Information Sheet does considered a material breach of the contact. more than just propound the bene"ts of the MLS, it answers many ques- Similar to the concept of the pocket listing is the newly popular private listing tions that a seller may have about the club or group. MLS and what happens to his/her listing when it is placed in the MLS. Listings are kept out of the MLS and exposed only to members of the club/ In the case of a pocket listing, it is group, which is typically made up of a limited number of select brokers. #ere especially important for a broker to are many legal concerns associated with such groups, such as the concern that retain a copy of the MLS Informa- certain segments of the population who may be members of a protected class tion Sheet or its equivalent initialed are being omitted from potential buying pool and the concern that the pool has by the seller in his/her "le so that the established a set required cooperative brokerage commission, which could be a broker can document that the seller violation of anti-trust laws. It is important to keep in mind that the MLS has was fully informed about the MLS considered all of these legal issues and that through its administration and Rules before making the decision to keep takes steps to lessen the possibility that brokers and sellers will be found liable the listing out of the MLS. for such violations. Qualifying brokers should establish Since it is the seller who must make the decision to keep the listing out of the an o(ce policy on pocket listings. MLS, it is not enough that the broker Remember, associate broker liabil- The PowerPoint understands how the MLS works; the ity means qualifying broker liability. seller must be fully informed about the So, qualifying brokers should know slides from the 2014 MLS. when and why a listing is not being placed in the MLS and con"rm that Fall Legal Update Some MLS/Seller Wavier Forms go a seller has been fully informed of the class are available into great detail about the bene"ts of bene"ts of the MLS before making a the MLS; others simply have the seller decision to keep the listing out of the in the members acknowledge that the broker has dis- MLS. only/legal resources cussed such bene"ts with him/her. section of www. Independent Contractor Status vs. nmrealtor.com Employee Status If it walks and talks like a duck, it’s probably a duck. #ere have been an increasing number of lawsuits cen- tered around the relationship between associate brokers (AB) and qualifying brokers(QB). While most of these relationships are typically classi"ed as independent-contractor (IC) relation- ships, the key is not in what the AB is called so much as how the AB is actually treated. In an employer-employee relation- RANM REALTOR® Voice | Third Quarter 2014 | Page 6 ship, the employer has a signi!cant Real Estate Broker’s Act an “employee” is de!ned as someone employed by the degree of control over the employee. brokerage acting on behalf of the owner of the real property. If some/all of the Employers direct when, how and following criteria is met, the NMREC may consider the person an employee: where employees accomplish their R55."5/-#(--51#."")&-5.2-5 ,)'5."51),%,]-51!-5),5)''#--#)(: tasks and provide the necessary tools R55."5/-#(--5*3-5."51),%,]-5 ]-5.2:5( of the trade. R55."5/-#(--5)0,-51),%,]-5)'*(-.#)(5#(-/,(5(5*3-5/('*&)37 ment insurance contributions on behalf of the worker. In contrast, an IC determines when, how, and where to perform his/her In New Mexico, we can !nd additional guidance from the Construction Indus- work and is responsible for his/her tries Division that by default considers a worker an employee unless at least four own tools or equipment to provide of six criteria are met. For additional details regarding this criteria, please see the the service rendered. RANM Annual Conference Legal Update Power Point presentation at nmreal- tor.com. "e most important aspect in deter- mining the type of relationship is the New Mexico courts have traditionally held the principal test to determine if one amount of control that the business is an IC or an employee is to look at whether the employer had any control over has over the worker; the more control, the manner in which the details of the work were to be accomplished. the greater likelihood it’s an employ- ee-employer relationship, no matter "e Courts have held that it is the “right to control” not the “exercise of that what the parties call it. right” that furnishes the test. In other words, even if the business doesn’t exert control over the worker, if it has the right to exert control over the worker, then "e following discussion focuses on it tends to be viewed as an employer-employee relationship. the QB-AB relationship, but much of the same would be true for unlicensed So as to not treat ABs as employees, QBs should avoid the following: assistants hired by either QBs or ABs. R55,+/#,#(!5-5.)5*, ),'5-,0#-5/,#(!5-.51),%5")/,-: R55,+/#,#(!5-5.)5*, ),'5-,0#-5.55-*#ŀ5&).#)(: Under New Mexico law, an AB can R55'%#(!5..((5.5-.Ŀ5'.#(!-5'(.),3: be classi!ed as either an employee R55*,)0##(!5.,#(#(!5 ),5-5(5 or an IC and there must be an IC R55-/**&3#(!5.))&-5(5'.,#&-5.)5-8 or employee agreement between the QB and AB.