The Creel Deal

In an increasingly Fine oriented society, those that work in the real estate industry  are getting more and more attention. Personally, I'm all for it, I think it keeps the industry honest. Out of curiousity, I did a little research to see what types of people were getting hit hardest.

Here are quite a few interesting penalties levied:

·         In Boston The U.S. Environmental Protection Agency filed enforcement complaints against two New Hampshire realty companies for failing to properly notify home buyers and renters of risks from exposure to lead paint, as required by federal law. EPA is proposing a fine of $33,892 against Senecal Properties and $13,200 against Lacerte Realty, both based in Manchester, NH.

·         In the first case of its kind, the Alexandria Human Rights Commission unanimously agreed that Long & Foster Real Estate Co. discriminated against a single gay man who wanted to buy a home in a quiet, tree-lined neighborhood. Instead, the house went to a young married couple, which continues to own it. The commission cited the McLean-based real estate company for discriminating against Lawrence Cummings, 52, because of his marital status or his sexual orientation. In February 2004, Cummings and his partner had already made offers on six houses and were getting tired of looking. When he saw the ranch-style house on Pullman Lane on a Saturday, he   thought he had found what he was looking for. "I thought, 'Oooooh, cute" he explained. He met the sellers briefly and made an offer for the asking price -- $555,000 -- that same day. "I thought surely I was going to get this house," he said. But two days later, his agent called and said the owner had chosen a young married couple that had made an offer of $45,000 less. "She said it was the fact that I'm single and they sensed that I'm gay," Cummings said. And so he filed his complaint.

·         REALTOR® compliance with the DATCP telephone solicitation rules continues to be a frequent Legal Hotline topic, while amendments to the Code of Ethics Amendments Standard of Practice 16-13 raise new questions about a requirement for REALTORS® to ask buyers if they are party to a buyer agency agreement. The high court, in the case Meyer v. Holley, reversed a decision by the U.S. Ninth Circuit Court of Appeals in California, which had extended liability to owners and officers. In the case, a racially mixed couple sought to make the owner of Triad, REALTORS®, personally responsible for the actions of one of its agents who allegedly had made disparaging remarks about the couple. "NAR is pleased that the Supreme Court adopted the position advanced by NAR in its amicus curiae (friend of the court) brief that traditional principles of vicarious liability apply in fair housing cases. As a result, the court found that innocent officers and owners of residential real estate corporations would not be held personally liable for the unlawful conduct of the corporation's employees or agents," said Laurie Janik, NAR general counsel.

·         In Meyer v. Holley, an interracial couple alleged that they were discriminated against by a real estate agent, and brought a claim under the Fair Housing Act against the agent and the real estate firm for whom the agent worked. The couple also personally sued the individual owner and officer of the firm, claiming that he also was responsible for the agent's alleged conduct.

The trial court applied well-recognized principles to dismiss the Fair Housing Act claims against the individual owner, holding that vicarious liability principles permitted only the corporation, and not the individual owner and officer of the corporation, to be liable for misconduct by the corporation's agents. The Ninth Circuit Court reversed the decision, concluding that traditional vicarious liability rules did not control with respect to the personal liability of corporate shareholders and officers in Fair Housing Act cases, and that owners and officers may be liable "simply on the basis that the owner or officer controlled (or had the right to control) the actions of the employee."

·         Hefty fines -- $60 million worth -- have been recommended in response to a lawsuit filed in the mid-1990s against Sandicor Inc., which operates the Multiple Listing Service in San Diego County, and the five regional realtor associations that access the local MLS. In a March 10 opinion written by Federal Judge Alex Kozinski of the 9th U.S. Circuit Court of Appeals based in San Francisco, the groups would pay the fines in addition to attorney's fees. San Francisco attorney David Barry filed the lawsuit on behalf of local licensed real estate agents Arleen Freeman and Jim Alexander. Barry is still seeking certification for a class action suit.

It alleges Sandicor and the local realtor associations have engaged in price fixing since they combined three MLS services for the region into one in 1990 and 1991.  Before the single MLS, 11 associations worked from three different listing services, charging members for access to the service and technical training and support. Fees were as low as $10 per month for the San Diego Association of Realtors -- the largest association in the county -- and $50 for the associations in Fallbrook and Valley Center.

Sandicor's price was $25 per month. The corporation said it set prices so that low pricing at another association couldn't hurt another association.
Now, according to SDAR President Cheryl Betyar, close to 14,000 members subscribing to Sandicor's MLS pay $127 per quarter.
Antitrust law says price fixing and barriers that impact commerce are illegal.

Experts and analysts have determined the pricing has not hurt agents, their commissions, or their clients, Betyar said. Barry asserts Sandicor and the associations hurt agents by overcharging. The plaintiffs bid out the MLS and support services to an independent contractor, which would have charged only $4 per month, not $25. The lawsuit has been heard at the state and now the federal levels, and this is the first ruling against the local associations.

·         As of June, the number of complaints opened with the Arizona Department of Real Estate had jumped 53 percent since 2003, the year before the housing boom took the Valley by storm. Complaints forwarded for discipline increased 150 percent in that same time.

·         The broker-owned listing service, Northwest MLS, of which Redfin is a member, ruled that the reviews violated its regulations against advertising other brokers' listings. The MLS has issued a $50,000 fine to Redfin and threatened to terminate the brokerage firm's access to MLS data, which it displays on its Web site.

·         If you are a Realtor in Georgia, you may indirectly be a party to campaign violations in the last election cycle. What the Georgia Association of Realtors call a mistake, the State Ethics Commission calls election fraud. More than $400,000 in campaign contributions were never disclosed during the 2006 election cycle. Odds are this is a mistake as the Realtors have been huge contributors in state politics over the years. What is interesting is that they face an $80,000 fine for their failure to follow the law. And if things have not changed, making a mistake when breaking the law does not absolve the parties.

·         The Real Estate Council of B.C. has fined a Vancouver realtor $10,000 and cancelled his license - its stiffest penalty ever - for misappropriating client funds.

Council spokesman Anthony Cavanaugh said the disciplinary action followed an investigation into allegations made against Smrat (Sam) Sharma.

The most serious accusation came from one Sharma's clients, who had made a successful offer on a home on Vancouver's Westside.

Cavanaugh said Sharma had the buyer make out a $45,000 deposit check to his own numbered company, instead of putting it in trust with his brokerage.  "Trust monies are sacred in trust accounts," Cavanaugh said. "Real estate licensees cannot touch those monies, and if they do, obviously the consequences are quite severe, as you can see in this instance."

The client's money has been refunded from a special compensation fund. Cavanaugh said Sharma is the first realtor suspended under new powers given to the real estate council last year. Sharma will have to wait at least five years before being able to apply to work as a real estate agent again.

·         In a fair trading first, a Sydney real estate agency has been fined more than $14,000 for understating the estimated price of a house to prospective buyers. The agency was caught out after several people who attended the auction complained that the house fetched as much as $400,000 over what had been quoted to them as an estimate. The house, in the upmarket north shore suburb of Lane Cove, was auctioned for $1.535 million by the company Sandra Peach Real Estate Pty Ltd, trading as Ray White Lane Cove.

However, complainants to NSW Fair Trading said they had been quoted as much as 36 per cent below that. On the back of the estimate given by the agent, one prospective buyer had paid for a building inspection, thinking the house was within budget. Sandra Peach Real Estate Pty Ltd had been fined $9900 under new provisions in the Property, Stock and Business Agents Act. The agency's director, Sandra Peach, was fined $4400 for understating the estimated sale price of the property.

·         St. Catharines, Ontario, December 11, 2007 ... Jeanette Martin, of Port Colborne, pleaded guilty in the Ontario Court of Justice in St. Catharines on December 6, 2007, to two counts of failing to file tax returns. She was fined $2,000 and given nine months to pay. Martin, a self-employed real estate agent, failed to file her 2004 and 2005 personal income tax returns as required. The Canada Revenue Agency (CRA) made several requests for the tax returns before serving notices demanding that the returns be filed. Failure to comply with these notices resulted in charges being laid.

·         In Honolulu Hawaii, The Real Estate Commission fined Thomas F. Schmidt, doing business as Tom Schmidt Realtors, $5,000 and revoked his license.

·         In Maryland Weichert Realtors and Century 21/AAA Realty, had their License REVOKED and licensee FINED $5,000 for providing false and misleading information in a lease application, for immediately defaulting on the lease, and for providing false information to the Commission investigator.

·         In Maryland W.F. Chesley Real Estate, Inc. and O'Conor, Piper & Flynn had their License REVOKED and licensee FINED $40,000 for leading the buyer to believe that he had purchased property while failing to disclose that the property belonged to a third party who was facing foreclosure, for taking deposit money from the buyer and failing to place that money in trust, for failing to give the buyer a written contract memorializing the agreement, and for failing to make payments on the existing mortgage as promised to the owner. A Guaranty Fund award in the amount of $9,900 was made as a result of the conduct of the licensee.

·         In the largest enforcement action, First American Title Insurance Company of Santa Ana, California, agreed to close down their sham affiliated businesses and pay a $500,000 civil penalty to the State of Minnesota. Commerce Department investigators identified 35 affiliated business arrangements between First American and over 600 referral partners that included real estate agents and brokers, mortgage originators, building contractors, land developers, and others. First American set up partnerships or limited liability companies, offering 80 percent ownership to their referral partners while retaining 20 percent ownership for themselves. 

The referral partners' initial investment was typically $500. According to the consent order, First American allegedly set up offices, hired and trained employees and directly supervised those employees. Some of the affiliated businesses even shared employees and office space. In some instances, officers of First American were listed as the office manager or "responsible person" for the affiliated business.

The referral partners and their associates were allegedly encouraged to direct their customers to the affiliated businesses for closing services and title insurance and, in return, receive an annual dividend from the business. While neither admitting nor denying the department's allegations, First American agreed to pay a civil penalty of $500,000 and will also help the Department of Commerce inform consumers about title insurance by developing content for the department's website.

·         The Department of Commerce recently imposed a $500,000 civil penalty against Dale Dodge, owner of Verity Title and Abstract, Bloomington, MN, for allegedly misappropriating funds owed to its customers so Dodge could support an extravagant lifestyle. To date, the Department of Commerce has been able to identify a total of $2.4 million in outstanding claims against Verity Title. The company has filed for bankruptcy protection.

·         Gibraltar Title Agency of Edina, Minnesota signed a consent order agreeing to close down their affiliated businesses including Clear Title, Star Title, AM Title, and Sound Title. They also agreed to reimburse customers a total of $100,000 and pay a $10,000 civil penalty to the State of Minnesota.

·         American Residential Mortgage of Maplewood, Minnesota signed a consent order agreeing to a $5,000 civil penalty. The Department alleged that American Residential Mortgage failed to disclose their affiliated business arrangement with Titles Plus.

·         In September 2005, the Department of Commerce entered into a consent agreement with Powerhouse Title, LLC of Lino Lakes, Minnesota, requiring them to cease and desist from selling title insurance without a license and pay a $100,000 civil penalty to the state. Powerhouse was alleged to have sold title insurance without a license and accepted commissions from Chicago Title Insurance Company in violation of Minnesota law. They also failed to properly disclose their affiliated business relationships, also a violation of Minnesota law and the Real Estate Settlement Procedures Act (RESPA).

·         In the Blue Mountains of New South Wales, Australia real-estate agent who ripped his competitors' advertisements out of newspapers and magazines, and then lied about his conduct, has been fined and ordered to perform 200 hours of community service. John Patrick Neville, 63, who ran the Century 21 Combined Wentworth Falls real-estate agency from 1994 to 2005, organized for rivals' advertisements to be torn out of The Blue Mountains Gazette and Focus on Property magazine at various real-estate offices. Justice Lindgren fined Neville $2160 and ordered he perform 200 hours of community service.

So as you can all see, the crimes committed get pretty creative and pretty ugly. Fortunately, one good thing that has happened as a result of the mortgage/housing crises is that activities that damage the industry we work in, are being cracked down on and not tolerated. As these crimes damage our image, we must weed out these people or the industries image as a whole will suffer.

All professional sectors have their share of bad apples, and we are no different. It does not change the fact that undoubtedly a majority of the people working within our industry are hard working, honest, and respectable people with only their clients best interest at heart. Lets do all we can to keep it that way.