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THE NAR CLEAR COOPERATION POLICY AND ITS LEGAL CHALLENGES

UPDATE RE PENDING TAN LITIGATION (MAY 28, 2020)

On May 27, 2020, the District Court (Northern District of California) issued an Order Denying TRO Applications and Setting Hearing on Preliminary Injunction.  The Court indicated that TAN “has not carried its burden under Winter v. Natural Resources Defense Council, 555 U.S. 7, 20 (2008).”  The Court set a preliminary injunction hearing for 10:00 a.m. on June 25, 2020.  TAN may file a supplemental brief in support of a preliminary injunction by June 4, 2020.  Defendants NAR, CAR, and SFAR may file a response by June 11, 2020. Top Agent Network may file a supplemental brief in support of a preliminary injunction by June 4, 2020.  The defendants may file a response by June 11, 2020. “The briefs should focus on Top Agent Network’s likelihood of success on the merits.” 

On June 2, 2020, the Court re-set the hearing regarding the application for preliminary injunction for July 1, 2020 at 1:30 p.m.

THE NATIONAL ASSOCIATION OF REALTORS CLEAR COOPERATION POLICY

AND ITS LEGAL CHALLENGES 

On September 20, 2019, the MLS Technology and Emerging Issues Advisory Board of the National Association of Realtors (the “NAR”) issued an opinion recommending adoption of a Clear Cooperation Policy, also known as MLS Statement 8.0 or the MLS Cooperation Proposal.  The NAR adopted in November  2019 what became known as the “MLS Clear Cooperation Policy,” and then incorporated the Policy into the NAR’s 2020 governing Handbook.  The Policy became effective January 1, 2020, and each NAR-affiliated MLS was required to implement the Policy by May 1, 2020.  MLS affiliates throughout the country have adopted the MLS Clear Cooperation Policy as of May 1, 2020, including the Oregon multiple listing services.

This post summarizes the MLS Clear Cooperation Policy (with NAR FAQ’s and author commentary) and pending legal challenges.

THE MLS CLEAR COOPERATION POLICY

The NAR claims the action was taken to bolster brokerage cooperation around the country “in response to concerns about the use of pocket listings and other tactics to keep properties off the MLS to the disadvantage of homebuyers and sellers.”  The MLS Clear Cooperation Policy provides:

“Section 1.01 – Clear Cooperation

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public. (Adopted 11/19)

Note (By NAR): Exclusive listing information for required property types must be filed and distributed to other MLS Participants for cooperation under the Clear Cooperation Policy. This applies to listings filed under Section 1 and listings exempt from distribution under Section 1.3 of the NAR model MLS rules if it is being publicly marketed, and any other situation where the listing broker is publicly marketing an exclusive listing that is required to be filed with the service and is not currently available to other MLS Participants.

Section 1.3 Exempt Listings

If the seller refuses to permit the listing to be disseminated by the service, the participant may then take the listing (office exclusive) and such listing shall be filed with the service but not disseminated to the participants. Filing of the listing should be accompanied by certification signed by the seller that he does not desire the listing to be disseminated by the service.

Note 1: Section 1.3 is not required if the service does not require all (indicate type[s] of listing[s] accepted by the service) listings to be submitted by a participant to the service.

Note 2: MLS Participants must distribute exempt listings within (1) one business day once the listing is publicly marketed. See Section 1.01, Clear Cooperation.”

NAR FREQUENTLY ASKED QUESTIONS (WITH AUTHOR COMMENTARY)

The NAR has attempted to answer a variety of questions regarding implementation of the MLS Clear Cooperation Policy, which may be found in its FAQ’s, including the following (with author’s comments):

  1. “Can a seller or the listing broker ‘opt out’ of the policy’s obligations?   The new policy does not include an ‘opt out.’  Any listing that is ‘publicly marketed’ must be filed with the service and provided to other MLS Participants for cooperation within (1) one business day.”  “Business day” excludes Saturdays, Sundays and both federal and state holidays.
  1. “How does the new deadline of ‘1 business day from marketing a property to the public’ correspond with the existing local MLS’s filing dealing, which varies from MLS to MLS?  The local MLS’s filing deadline, typically found in Section 1 of the MLS rules, is the amount of time that a broker has to file the listing with the service after receiving all of the appropriate signatures on the listing contract. Once a broker begins to publicly market the property, they have 1 business day to file the property with the service. Specific questions about filing deadlines can be directed to your local MLS.”

Author’s Note:  See, for example, the Shared Database Collaboration Rules and Regulations for MLSCO, SOMLS, and KCAR regarding various Oregon associations, including the Central Oregon Association of Realtors (COAR).

  1. “If the MLS has established a coming soon status, or other pre-marketing solution that shares listing data with all MLS participants and subscribers, does that comply with the cooperation requirements of the policy? Yes.”

Author’s Note:  Per the Shared Database Collaboration Rules and Regulations for MLSCO, SOMLS, and KCAR, a listing may not be in “Coming Soon” status “for more than thirty (30) days and will automatically switch to Active after thirty (30) days or on the Projected Active Date noted in the MLS (Marketing Date on the MLS Listing Agreement), which is later.”  A listing also “may not be in ‘Coming Soon’ for more than thirty (30) days.  In the event a listing requires more time before being made Active, the listing must be changed to Withdrawn.”

  1. “Does Policy Statement 8.0 require listings to be included in an MLS’s IDX displays? While listings that are displayed on the Internet must be submitted to the MLS and distributed to other MLS participants for cooperation, submitting a listing for cooperation within the MLS does not necessarily require that listing to be included in an MLS’s IDX display, if the seller has opted out of all Internet display. Per MLS rules, participants can work with their listing clients to determine an appropriate marketing plan, taking into account the client’s needs and full disclosure of the benefits to market exposure.”
  1. “Does Policy Statement 8.0 prohibit office exclusives? ‘Office exclusive’ listings are an important option for sellers concerned about privacy and wide exposure of their property being for sale. In an office exclusive listing, direct promotion of the listing between the brokers and licensees affiliated with the listing brokerage, and one-to-one promotion between these licensees and their clients, is not considered public advertising.  Common examples include divorce situations and celebrity clients. It allows the listing broker to market a property among the brokers and licensees affiliated with the listing brokerage. If office exclusive listings are displayed or advertised to the general public, however, those listings must also be submitted to the MLS for cooperation.”

Author’s Note:  It would appear a brokerage with multiple offices may aggregate all its exclusive listings under this exemption, that a franchisee brokerage office would be limited to that franchise brokerage only, and that a single office independent brokerage would be limited to brokers affiliated with that office.  The Policy does not define “licensees affiliated with the listing brokerage” as it pertains to this Policy.  Also, most local MLS’s will have special forms for signing by the seller.  For example, MLSCO, SOMLS and KCAR require that an Exclusive Listing – Office Exclusive Form be completed and signed and kept on file with the brokerage.

  1. What constitutes “Public Marketing”? The “public marketing” examples identified in the Policy include “flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.”

Author’s Note:  “Public marketing” may be broad enough to include informal email, or discussions over coffee, between brokers about what pocket listings a broker may have.  It has been noted by at least one MLS that office meetings or discussions within a brokerage form, and one-on-one discussions with a client are not considered public marketing, but that a sign or flyer with the purpose of marketing the property as For Sale or Coming Soon, sending postcards or blast email to contacts advertising the property, multi-brokerage sharing networks, including private Facebook groups, and individual email to an agent outside of your brokerage firm do constitute “public marketing” under the Policy.

  1. “Does Policy Statement 8.0 require listings to be submitted to the MLS if they are advertised to a select group of brokers outside the listing broker’s office?   ‘Private listing networks’ that include more brokers or licensees than those affiliated with the listing brokerage constitute public advertising or display pursuant to Policy Statement 8.0. Listings shared in multi-brokerage networks by participants must be submitted to the MLS for cooperation.”

Author’s Note:  The formal “informal” networks of “pocket listing” collaborations will be directly affected by the Policy.  Also,  the “public marketing” examples identified in the Policy include but are not limited to “flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.”  “Public marketing” may be broad enough to include informal email, or discussions over coffee, between brokers about what pocket listings a broker may have.  For example, it has been noted by at least one MLS that office meetings or discussions within a brokerage form, and one-on-one discussions with a client are not considered public marketing, but that a sign or flyer with the purpose of marketing the property as For Sale or Coming Soon, sending postcards or blast email to contacts advertising the property, multi-brokerage sharing networks, including private Facebook groups, and individual email to an agent outside of your brokerage firm do constitute “public marketing” under the Policy.

  1. “Does Policy Statement 8.0 apply to non-active listings? Policy Statement 8.0 applies to any listing that is or will be available for cooperation. Pursuant to Policy Statement 8.0, ‘coming soon’ listings displayed or advertised to the public by a listing broker must be submitted to the MLS for cooperation with other participants. MLSs may enact ‘coming soon’ rules providing for delays and restrictions on showings during a ‘coming soon’ status period, ensuring flexibility in participants’ listing and marketing abilities, while still meeting the participant’s obligations for cooperation.”
  1. “What if the listing isn’t ready to be shown? Are ‘Coming Soon’ or ‘Delayed showing’ listings allowed under Policy Statement 8.0? The concept of ‘Coming Soon’ and ‘Delayed Showing’ can be achieved within the local MLS.  Listings which are truly not yet ready to be shown can be shared with the MLS’s brokers and agents to create exposure while the property is being prepared for showing.  MLSs can also add clarity to the coming soon and delayed showing process by defining specific statuses and showing requirements if these listings are to be included in the MLS. The most common implementations do not allow for showings of the listing until its status is changed to active, and any showings of the listing would immediately trigger that status change.”
  1. “Does Policy Statement 8.0 require a broker to turn in every listing to the MLS within 1 business day of signing the listing? MLSs have different local rules as to listing turn-in times. If a listing is taken and is not yet ready to be marketed/shown, longer timelines for turn in may apply in local markets. If a listing is marketed to the public, however, Policy Statement 8.0’s 1 business day turn-in timeline goes into effect.”
  1. “What exclusive listings and property types are applicable under the new MLS Statement 8.0? The obligations of Statement 8.0 were specifically adopted to address concerns with residential ‘for sale’ exclusive listing contracts required to be filed with the service. Based on the Advisory Board’s discussions that did not include commercial properties, rental properties, and new construction developments with multiple properties (single family homes, condos, etc.) (sic) Those property types, and other exclusive listings that require mandatory submission, can be included in the application of Statement 8.0 at local discretion.”

Author’s Note:  The Shared Database Collaboration Rules and Regulations for MLSCO, SOMLS, and KCAR provide that “for new construction and properties undergoing renovations prior to being sold, the listing broker may enter $1 in the listing price while in the Coming Soon status and explain the listing price delay in the Private Remarks.  The actual listing price must be entered prior to the listing becoming Active.  NOTE:  If the listing price is updated within 24 hours of the listing changing to Active, it will appear as both a New Listing and a Price Change on the Hot Sheet.  Additionally, if the User has customized the timeframe on the Hot Sheet with a longer time period (can be up to 1 week), the listing could still appear in both sections.”

The Central Oregon Association of Realtors has indicated that “Commercial for Lease, Business Opportunity and multi-list new construction in the same development that is exclusively listed with the Participant are exempt from the Clear Cooperation Policy per the NAR and our Oregon Datashare Collaboration  Rules.”

  1. “How will the new policy affect listings not yet available for showing and the calculations of ‘days on market?’ These are factors that can be determined locally.  Brokers should discuss with their MLSs the desire to submit properties which are not yet ready for showings in the MLS. Brokers and MLSs should consider whether a new listing must immediately become active, whether a temporary ‘coming soon’ or ‘no showings’ status is allowed, and when ‘Days on Market’ will begin in these scenarios.

Author’s Note:  Pursuant to the MLSCO/SOMLS, KCAR Shared Database Collaboration Rules and Regulations Section 3.4, “Days on Market” do not accrue while in the “Coming Soon” status.

  1. “Why was the time-frame within the recommendation updated to ‘one business day’? The MLS Tech and Emerging Issues Advisory Board held a conference call on October 30, 2019. Based on feedback and concerns over the time enforcement, the timeframe was changed from ’24 hours’ to ‘one business day.’”

PENDING LITIGATION 

On May 11, 2020, Top Agent Network, Inc. (“TAN”) filed a lawsuit in the United States District Court, Northern District of California against NAR, the California Association of Realtors, Inc. (“CAR”) and the San Francisco Association of Realtors (“SFAR”).  (USDC Northern District of California, Case No. 3:30-cv-03198-VC.)  TAN identifies itself as a “prime example of a competitor providing an alternative to NAR-controlled MLS.  TAN’s membership is limited to the top ten-percent of agents in select regions throughout the country.”  Its members-only model is a platform that “allows high-producing agents to exchange market data and information on a more selective, controlled basis” and enables properties to be marketed without the use of a NAR-affiliated multiple listing service.

TAN alleges in its Complaint (Top Agent v NAR) that by implementation of the MLS Clear Cooperation Policy, NAR, CAR, and SFAR have violated various federal and California anti-trust and unfair competition statutes.  On May 13, 2020, TAN filed its Motion for Temporary Restraining Order and Order to Show Cause Why a Preliminary Injunction Should Not IssueIn essence, TAN seeks to the repeal of the MLS Clear Cooperation Policy and an injunction barring enforcement of the Policy.

On May 19, 2020, NAR filed its Opposition to Motion for TRO, and TAN filed its Reply to Opposition to TRO on May 21, 2020.  A hearing date, if authorized by the trial judge, has not yet been scheduled.

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