Here are several
articles and columns about real estate broker conduct written by Larry Lowenthal, an expert witness
who is retained for lawsuits wherein brokers in Florida and other
states are charged
with malpractice, failure to disclose, negligence, dishonesty,
deceptive conduct, violations of Florida law and the Realtor Code of
Ethics. Depending upon the facts and the law, Larry works for
plaintiffs and defendants, and testifies at depositions and trials.
Unless noted, all of the following articles were originally published in
the newsletter of the South Broward Board of Realtors.
To see letters and
interviews published elsewhere, click
Ethics Overview: from Grievance to
By Larry Lowenthal, Chair, Grievance Committee
In the course of going about our business, situations or
events occur that can lead to Realtors being charged with some form of
misconduct or unfairness by customers and Realtors. The National
Association of Realtors has established a mechanism whereby local boards
can process such charges and complaints without involving duels or the
Our area of concern is strictly limited to matters of professional
ethics and arbitration or mediation of commission disputes. And just so
there is no uncertainty or vagueness in the process, the local boards are
guided by an official Code of Ethics that is updated every year as our
business evolves and new types of situations develop.
The Grievance Committee’s function is to examine and then filter ethics
complaints and arbitration requests as submitted to the board. Like a
grand jury, we basically judge the complaint itself to see if the alleged
misdeed(s) corresponds to any of the 17 Articles listed in the Code of
Ethics. Then we vote to dismiss the complaint, ask for more information,
or forward it to Professional Standards for a full hearing with the
parties in attendance.
Just one side
Here’s the substance of how Grievance “judges” a complaint. We ask,
“If this complaint is true, might there be a violation of the Code of
After discussing the complaint to make sure we understand it,
and after examining the Code to see if there are corresponding Articles,
we vote the question. Despite the great curiosity of some members, we do
not – and should not in my opinion – get the respondent’s side of the
story. Because if our mission is to only evaluate the complaint, then
taking the response into account is a waste of time. That’s solely the
responsibility of Professional Standards.
Occasionally, the allegations describe activities that seem criminal,
but unless there are specific violations of the 18 Articles, the
complaints are dismissed. (Example: a homeowner sent in a complaint
stating that a Realtor obtained a courtesy key in order to enter and
wantonly vandalize his property. Nasty as it was, that kind of activity
is not addressed in the Code, and the complaint belongs with the DBPR and
Because of simple, straightforward guidelines that we follow,
arbitration requests are much simpler to process and most are voted
Sometimes our job is easy and obvious, sometimes it’s labored and
tortuous when a complaint is not precisely written, the links are not
clear, or the charges are many and subtle or complex.
Part 2: Professional Standards
It’s the responsibility of the Professional Standards
Committee to conduct full hearings, which are somewhat like trials, on
matters forwarded by Grievance. These matters are limited to Ethics
complaints and requests for Arbitration.
A hearing panel typically consists of three to five committee members
and is conducted by a chairman. Both parties to the issue are in
attendance along with their evidence, witnesses, and sometimes even their
attorneys. The proceedings, sometimes referred to as Tribunals,
are taped and each party and witness is sworn in.
We go through the procedure by following step-by-step guidelines
provided to us by NAR. This is to ensure that the parties – complainants
& respondents – receive a full and fair hearing with all due process
afforded to both sides. Afterwards, in closed session, we discuss our
findings on each Ethics charge to determine if there is a violation or to
dismiss. If the former, we then assess a penalty that can range from a
simple letter of reprimand, continuing education or even a monetary fine
Who gets the money?
In arbitration disputes, a typical conclusion determines which party
gets the disputed monies. During the course of arbitration hearing, each
side presents its case as the hearing panel listens closely and asks
questions which usually focus on procuring cause. Contrary to what many
agents believe, the mere fact that you write up the offer does not
necessarily entitle you to the commission. Procuring cause is a chain of
events, and writing an offer is just one of the many complex links.
Sometimes the respondent gets to keep the whole amount, but we’ve had
cases where a panel decided the complainant is actually entitled to some
part of the commission.
Ethics decisions are sent to the Board attorney for review, then
provided to the Board of Directors for ratification. In keeping with
confidentiality requirement, the Board gets it in abstract form with no
Got a gripe?
Larry Lowenthal, Grievance Committee
Your Board – like all in the country
– has procedures in place whereby both Realtors and members of the public
can complain about the behavior of other Realtors. In order for these
complaints to be processed, the alleged actions (or inactions) if true,
must constitute violations of one or more of articles of NAR’s Code of
In future issues, you will read
sample cases to help you identify what may or may not constitute a breach
of Ethics, but a reading of the Code’s articles will serve as an immediate
guide to professional conduct for both yourself and other Realtors.
If you ever have to file a complaint, you will be asked to specify which
Articles of the Code you believe were violated by the other Realtor.
Today, the Grievance Committee also asks you to make sure you include a
brief narrative explaining how and why you believe the other Realtor
violated each Article you are specifying. This will help the Committee
understand why you want the Board to take action, and without such a
narrative, we just may postpone deliberation of your charges until one is
received. Supporting documentation, while important, doesn’t fulfill
To claim only that “Realtor A
violated Article One when she lied to me” and nothing more just
doesn’t cut it. The narrative must include enough details to give the
complaint substance before Grievance can consider it. So take the time to
write, “Realtor A violated Article One when she
lied to me. She told me her seller refused my buyers’ offer and accepted
another offer when in fact she never presented mine and was only waiting
for an offer to come in from another agent in her office.”
I hope this never happens to you – either side of the
story. But if it does, that’s how it might look in writing.
Avoid problems: ask the Magic Question
By Larry Lowenthal, Grievance & Communications
At a Board-sponsored Ethics seminar, speaker
Al Liebert spent over half the time discussing Arbitration issues, and led
off the discussion by stating that most arbitration hearings are held to
discover “procuring cause”.
Procuring Cause is defined as “the
uninterrupted series of causal events which results in the successful
transaction”. But based on questions and comments from those in
attendance, it is clear that many Realtors still do not fully understand
“I thought whoever writes the
contract gets the commission.” Not
necessarily, replied Liebert. “I was told whoever shows the house
gets the commission.” Not necessarily, repeated the speaker. No
single event automatically determines who is entitled to a commission.
Once challenged, the entire transaction has to examined and analyzed,
which often means questioning the buyers as well.
It’s not uncommon for Realtor A to
initially show the property, for Realtor B to write the successful offer,
and for both to claim the same commission. This will end up in the hands
of a Board Arbitration panel to determine who actually earned it.
Liebert added that the National
Association of Realtors current policy is that the entire amount should be
awarded to one party OR the other, and not divided in any way. However,
if the panel finds that the transaction just could not have succeeded
without the efforts of both parties, then the panel may consider some sort
It’s a good idea for the competing
brokers to try and work something out between themselves before resorting
to a potentially all-or-nothing arbitration, especially when there are
circumstances and evidence favoring both sides. Board Mediation is also a
possibility if the brokers need help in arriving at a compromise.
The tip of the day
Liebert passed on this tip to help
prevent problems from coming up in the first place. Before you take new
prospective buyers out to show property – even before you discuss the
computer results with them – ask them straight out, “Are you working
with any other Realtor or broker?”.
If the answer is “no,” make a
written note to yourself and proceed. If the answer is “yes,” then
ask the second question, “If I show you a property that you would like
to buy, who would write up the offer?”. If the answer is you, make a
note to yourself and proceed. If the answer is someone else, end the
The two concepts named when the
original or “showing” Realtor loses customers – and commissions -- to
another are Abandonment: (“We liked the Realtor but she took off
for the weekend and did not call us back when she knew our parents wanted to see the house, so we found
another Realtor”) and Estrangement: (“The Realtor made
mean, disparaging remarks about homeless people we saw on the street
corner…he turned us off because of his attitude”).
When the “writing” Realtor loses the
commission, it’s often because of Intrusion: (“We
liked the house but another Realtor we met at a neighbor’s party told us
she could help us get it for less money. So we had her write the offer.”)
(Larry’s notes: There are occasions
when Realtors go to Board arbitration to determine who is procuring cause
of a listing commission. Finally, if another Realtor does not pay a
Board-arbitrated commission settlement, your broker’s only option is a
lawsuit, and the courts nearly always award a judgment based on the
Hearing Panel’s decision.)
Don’t use the MLS to
By Larry Lowenthal, Grievance
Have you ever shown a property and
discovered – too late – that the listing information contained seriously
false information? Do you remember how angry you got? The listing
Realtor either knew – or should have known – what to enter in the listing,
but purposely entered something else just to attract trusting Realtors
with customers in tow.
Well, in February, the Grievance
Committee reviewed a complaint alleging the entry of false and misleading
information in a property listing on the MLS. This was the first
complaint of its kind that we’ve seen this year, but based on what we see
in the listings, it may not be the last.
Sometimes, in their zeal to sell a
listing, Realtors may be tempted to cross the line and deceptively enter
false data. Our MLS rules identifies some items that are often “fudged”
-- the MLS area, square footage, garage, number of bedrooms, association
fees, lot size, and the like.
Besides the obvious exposure to agents
and their offices to costly lawsuits, transgressions may also lead to
discipline through the Ethics/Professional Standards procedure. This can
range from a reprimand to continuing education to a fine…even to
We think the best rule is the Golden
Rule. If you hate to be tricked by a false listing, promise yourself that
you won’t try to trick other Realtors.
And by keeping the MLS honest, you are
helping maintain the public’s confidence in our profession.
Violating the Code of Ethics can get you sued.
By Larry Lowenthal
Realtor at Century 21 Rose Realty West, Cooper City, Florida
Note: this article was not published elsewhere.
After we’ve been in the business a few
years, most Realtors seem to forget that we once swore to be guided by the
Realtors’ Code of Ethics. We don’t remember that the promise to do so is
the heart of the oath we took when we first joined our local board.
Because our memories of Code specifics
usually turn to dust, the NAR instituted a mandatory Ethics review that
each of us must attend every four years in order to keep our membership
The trouble is, not all Realtors take
the Code seriously, and their failures to do so frequently result in
miserable, nasty, expensive lawsuits as buyers, sellers, and other
licensees become plaintiffs who claim financial injury and initiate
actions at law.
You may wonder ask how this is
possible when the harshest punishments available to a board’s Professional
Standards Committee are summary expulsion from the board and/or a $1,000
On the surface, that seems like a good
question, which I will answer with another. What makes you think that the
injured parties are going to be content with simply filing an ethics
The fact is, lots of people never even
bother with filing ethics complaints and go straight to attorneys, who are
all too happy to advocate for them in a court of law. After all, that is
what litigation attorneys do – they either sue or they defend those who
are sued – at the rate of $250-$550 per hour.
As a Realtor called upon by attorneys
to offer expert testimony in lawsuits involving Realtors, I have seen the
good, the bad, and the loathsome. In case after case where the evidence
supports the plaintiffs’ claims for damages, I have stated my opinion that
the Realtors conduct violated one or more articles of the Code of
Ethics. And that is just the half of it.
You see, each of those relevant Code
violations also constitutes a breach of one or more duties imposed upon
licensees by Florida Statute 475. It’s easy as pie for most experts to
connect a violation of one to a breach of the other because 475.278 (2)
(a) is both simple and crystal clear. Among other requirements, It
declares that the duties of a Transaction Broker to buyers and sellers
include (1) dealing honestly and fairly, and (3) using skill, care, and
diligence in the transaction.
Now here’s the big news for most
readers; the fact that you no longer have to disclose your status as a
Transaction Broker does not relieve you of your lawful statutory duties.
When consulting to attorneys, I find
that nearly all are ignorant of our Code of Ethics, and they are happy to
add that fuel to their fire when focusing on a Realtor’s misdeeds. But
sometimes, a Realtor’s adherence to the Code will let me come to an
opinion that, in fact, the Realtor’s conduct is ethical and he or she is
being unjustly accused by a disgruntled buyer or seller.
Buyer sued the listing office that was handling sales at a large townhome
community, claiming substantial damages because the broker and salesperson
did not inform him of the presence of a sewage lift station and a
community trash compactor near the several units he had purchased. An
examination of the evidence showed that the clearly visible lift station
enclosure had been there for years, and that the huge compactor
construction stood out like an elephant at both the buyer’s agent’s many
inspections during construction and at the buyer’s walk-through.
Article 2 of The Code prohibits us
from concealing pertinent facts, and our corresponding FREC duty requires
us to disclose known but hidden defects in the property. Inasmuch as the
two items were out in the open, I testified that there was no concealment
on the part of the listing broker, and no requirement to disclose that
which was clearly visible and obvious.
Buyers sued a listing Realtor and the sellers for damages after their
offer to purchase her listing at full price without an appraisal was not
accepted, but a lower offer was. My examination of the evidence revealed
that the agent had negotiated a secret agreement with the sellers
providing for a lower commission if she also procured the buyers, which is
exactly what happened. Dual or variable commission arrangements are not
illegal, but according to Article 3 of the Code of Ethics, they must be
indicated as such in the MLS and the details have to be disclosed
immediately to any cooperating agent who plans to present an offer.
So, in my sworn deposition, I declared
that this breach of the Code also led to a violation of the FREC
requirement that licensees deal fairly and honestly. The sellers also
lost thousands of dollars when they dropped the price to meet the lower
appraisal, and they joined the buyers’ suit against the Realtor.
Buyer sued Realtor for substantial damages (claiming lost potential
profit) charging that the Realtor unfairly failed to inform him of better
competing offers. This was an easy case. It turned out that the buyer
neither asked if there were any competing offers, nor did the seller give
the required permission for his Realtor to reveal their existence.
Article 1 of the Code says that conduct is o.k., so I concluded that –
insofar as meeting the standards of FREC -- the listing Realtor was both
fair and honest.
Cases 4, 5, & 6:
I will spare you the details, just be sure to have your Seller’s
Disclosure forms signed by the buyers, get the signed forms back to
sellers, and keep copies for both yourself and your broker. This will
protect you from charges of violating Article 9 of our Code, and thus
insulate you from FREC charges that you failed to exercise skill, care,
and diligence in the transaction. More importantly, such taking care of
business can also help shield you from nasty claims of “failure to
disclose a hidden defect” (Article 2) if the seller itemized one in the
disclosure, and a count that you were unfair and dishonest. We’re talking
The Right Side
The Realtor Code of Ethics and our
duties as spelled out by Chapter 475 do not dovetail in every respect.
For example, FREC does not give a hoot if you recklessly make false or
misleading statements about your competitor or former partner -- conduct
that is outlawed by Code Article 15. But if a Realtor violates Code
articles that relate to any type of real estate transactions from
residential to commercial to leasing to management, there’s a chance that
one or both of the principal parties might suffer financial loss and, just
as bad, serious emotional distress.
That’s how lawsuits begin. And the
next thing you know, an expert is hired who will tie the violations of the
Code of Ethics to particular violations of Florida Statute 475, and then
tell the jury all about it.
Believe me; I would much rather help
your attorney defend you than help the plaintiff’s attorney prosecute
you. Study the Code, conduct yourself accordingly, and you will be on the