Definition of compliance:
1. The action or fact of complying with a wish or command
2. The state or fact of according with or meeting rules or standards.

Antonym: violation

I suppose one could deduct that you are either in a state of compliance or violation.

Our children seem to morph between the two on a regular basis and with ease.  Adults are usually not so quick to pull the trigger on not being in compliance.

Compliance and ethics are very closely related you can not have one without the other.  Fairness, honesty, disclosure, obedience, confidentiality are all words, as a realtor, we are familiar with.

I usually see realtors heading into problems when they forget who their fiduciary duty is with.  Their own self-interests seem to take over when the going really gets tough.

Having been a broker for many years, I have seen agents need to get signatures from their clients to complete their paperwork and get paid.  Remarkably with 5 minutes, the signatures have been gotten, and the agent returns to collect their check.

Years before digital signatures a wet signature was required, and I often wondered if they thought I believed that their client was sitting outside the office just waiting to sign any additional paperwork.

I guess the thought of committing forgery verses getting their check was not a long thought process.

Often, agents come to me and say that they do not have to follow their broker’s rules as they are not part of statute.  Brokers have the right to institute standards of practice for their office.  These are usually more restrictive than the statutes as statutes were devised to be a guideline for proper behavior and protection of the public.  

Some of the most violated compliance laws:

Unauthorized practice of law

This spawns lawsuits whenever brokers or salespeople provide legal advice. Article 13 of the NAR Code of Ethics states that “REALTORS® shall not engage in activities that constitute the unauthorized practice of law,” which begs the question, What is the unauthorized practice of law?

The courts have tried to strike a balance in their definition and take public policy into consideration. They don’t want the public damaged by unskilled practitioners, but they’ll look at whether it’s in the public interest to allow brokers to engage in certain activities, such as drafting clauses in legal documents. Generally speaking, courts have said that brokers are permitted to complete the blanks of a preprinted sales agreement that has been approved by an attorney. You may not draft documents or give legal advice.

In the past, to determine the appropriate role of the broker and the lawyer, NAR would sit down with the American Bar Association, but the U.S. Justice Department came down hard on that alliance, saying that it was dividing the marketplace. So if your association still has an agreement with the local bar association, you may want to consider rescinding it.

To limit legal advice liability: Know the parameters of what you may and may not do in your state, and urge clients to hire a lawyer if they have legal questions.

False or misleading advertising

These lawsuits can also address affinity programs, For Sale sign bans, and Internet advertising—a hot topic now.

Advertising must always comply with state license law or regulations as well as the REALTOR® Code of Ethics. Licensee laws frequently address requirements such as indicating the broker’s status as a licensee in each ad. The Code of Ethics (Article 12) mandates that REALTORS® be careful at all times to present a true picture in their ads.

Recently, real estate commissioners have been looking closely at Internet advertising. Several states have adopted new rules to govern advertising by licensees on the Internet, including the use of e-mail and bulletin boards.

To limit advertising liability: Assure that all ads are truthful and not misleading. Comply with any special rules adopted in your state that govern the advertising of property and the promotion of real estate services on the Internet. NAR has partnered with the Newspaper Association of America to develop guides to effective advertising.

Agency problems or breach of fiduciary duty

These lawsuits most frequently arise when a problem with a transaction causes one of the parties to seek legal advice, and the lawyer asks, “Well, who was representing you?” These cases account for about 10 percent of suits against salespeople and brokers.

Many of the suits involve claims of undisclosed dual agency. NAR’s Code of Ethics mandates agency disclosure, but laws governing the method and timing are different in each state. The broad common law agency duties are so poorly defined that many state associations have lobbied for statutory duties (written into law), allowing brokers to know exactly what duties they owe and what consumers can expect.

To limit fiduciary duty liability: Take continuing education on your state’s current laws on agency disclosure and promote the use of agency disclosure forms.

We are dealing with a moving target as far as compliance with technology moving as fast as it does.  But doing the right thing with your client, broker or fellow agent always leaves a peace of mind that lets you rest well at night.

Kolleen Kelley
Exp Realty, LLC
State Administrative Broker