Professional Standards Case Study – Article 13

Article 13 of the Code of Ethics and Arbitration Manual states:  Realtors® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.  Following is Case Study 13-3: Realtor®’s Obligation to Recommend Counsel When Needed:

Realtor® A was the listing broker for 25 acres of land owned by Client B. Shortly after Realtor® A’s sign was placed upon the property, Customer C called Realtor® A and expressed interest in purchasing the property. After inspecting the property, Customer C made a full price offer. Surprised, Client B prepared a counter-offer at a higher price. Realtor® A realized that he might have a legal claim for commission from Client B, but not wishing to jeopardize their relationship, agreed that he would go back to Customer C and attempt to negotiate a higher price. Upon being informed of the property owner’s change of mind and his requested higher price for the property, Customer C became upset and indicated his intent to consult his attorney to determine if he could force the seller to go through with the sales transaction at the price for which it had been originally offered. At this point Realtor® A advised Customer C that, in his opinion, litigation would be lengthy and expensive and that in the final analysis the sale could not be enforced. On the basis of Realtor® A’s advice Customer C agreed to the higher price, and the transaction was consummated. Shortly after, Customer C complained to the Board of Realtors® that Realtor® A had provided bad advice to him. The Secretary referred the complaint to the Grievance Committee which determined that a hearing should be held and referred the matter back to the Secretary to arrange such a hearing.

At the hearing, Customer C outlined his complaint to the Hearing Panel of the Professional Standards Committee. He indicated that he had intended to consult his attorney, however, because of the persuasive personality of Realtor® A and Realtor® A’s assurance that legal action would be an exercise in futility, he had not done so.

Realtor® A advised the panel that he had told Customer C that he could consult his attorney, but that, in his opinion, it would be a waste of time. He defended what he had told Customer C stating that it was only his opinion, not intended as a conclusive statement of law, and, in fact, was a correct statement under the law of the state. The panel concluded that Realtor® A, in pointing out the fact that legal action was likely to be time consuming and expensive, was stating a practical circumstance which Customer C should consider and was proper. The panel further concluded that the expression of an opinion as to the probable outcome of the case was not an “unauthorized practice of law” within the meaning of Article 13.

However, the panel noted that a Realtor® is obligated to “recommend that legal counsel be obtained when the interest of any party to the transaction requires it.”

In this case, Realtor® A was aware that the interest of Customer C required a legal opinion as to whether Customer C could compel Client B to convey title to the property and did not intend his personal opinion to represent a “statement of law” upon which Customer C could rely. Accordingly, Realtor® A was obligated to affirmatively recommend that Customer C consult his attorney to definitively establish the legal rights in question.

Having failed to make such a recommendation, Realtor® A was in violation of Article 13.