Code of Ethics Case Interpretations

This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Case #2-4: Obligation to Ascertain Pertinent Facts

Shortly after REALTOR® A, the listing broker, closed the sale of a home to Buyer B, a complaint was received by the Board charging REALTOR® A with an alleged violation of Article 2 in that he had failed to disclose a substantial fact concerning the property. The charge indicated that the house was not connected to the city sanitary sewage system, but rather had a septic tank.

In a statement to the Board’s Grievance Committee, Buyer B stated that the subject was not discussed during his various conversations with REALTOR® A about the house. However, he pointed out that his own independent inquiries had revealed that the street on which the house was located was “sewered” and he naturally assumed the house was connected. He had since determined that every other house on the street for several blocks in both directions was connected. He stated that REALTOR® A, in not having disclosed this exceptional situation, had failed to disclose a pertinent fact.

REALTOR® A’s defense in a hearing before a Hearing Panel of the Professional Standards Committee was:

  1. that he did not know this particular house was not connected with the sewer;
  2. that in advertising the house, he had not represented it as being connected;
  3. that at no time, as Buyer B conceded, had he orally stated that the house was connected;
  4. that it was common knowledge that most, if not all, of the houses in the area were connected to the sewer; and
  5. that the seller, in response to REALTOR® A’s questions at the time the listing was entered into, had stated that the house was connected to the sewer.

What do you think the Hearing Panel decided? Click here to find out.

The panel determined that the absence of a sewer connection in an area where other houses were connected was a substantial and pertinent fact in the transaction; but that the fact that the house was not connected to the sewer was not possible to determine in the course of a visual inspection and, further, that REALTOR® A had made appropriate inquiries of the seller and was entitled to rely on the representations of the seller. The panel concluded that REALTOR® A was not in violation of Article 2.

The Santa Clara County Association of REALTORS® (SCCAOR) awarded five prestigious awards during its Installation Ceremony at Villa Ragusa in Campbell last month.

2018 REALTOR® of the Year was awarded to Frank Cancilla of eXp Realty. This award recognizes individuals who demonstrate the principles of good real estate practice, promote home ownership, and provide distinguished service to all SCCAOR Members.

“It was a very humbling experience to be chosen by my peers as the recipient of this distinguished award,” said Cancilla. “I was completely shocked and overwhelmed with emotions after they announced my name. It was an amazing feeling.”

Cancilla has been a licensed REALTOR® since 2000 and has been a broker for the last 13 years. He is a current member of the SCCAOR Board of Directors and was the 2018 Chair of the Santa Clara County REALTORS® Foundation

Another award given out at the event was Affiliate of the Year, awarded to Don Crozier of Kal Financial. Don has been in the mortgage business for over 30 years and has been a SCCAOR Member since 2000. He currently serves as a member of the SCCAOR Affiliate Committee.

“One of the things I enjoy about this business is the ability to give back,” said Crozier. “It’s been a tremendous privilege to work with the REALTORS® in the community.”

The award for 2018 Volunteer of the Year went to Carl San Miguel of Highland Properties. He has been a REALTOR® for 46 years and he is the only two-time Past President in the history of the Association.

“Volunteering is already rewarding by the people you share your time on committees with,” said San Miguel. “To be chosen by my peers for my commitment to the REALTOR® community is icing on the cake. It is indeed humbling.”

The fourth award of the night, the President’s Choice Award, was given to Helen Chong of Haylen Group. Helen has been a REALTOR® for 14 years and currently serves on the SCCAOR Board of Directors.

“It was a complete surprise,” said Chong. “I am extremely honored and humbled to have been given this award, especially among so many other accomplished REALTORS®!”

In a surprise announcement, the Byron Brawley award was presented to Pam Foley. This award, which is SCCAOR’s highest honor, recognizes a career of exemplary and distinguished service to the members of the Santa Clara County Association of REALTORS®, the real estate industry of California, and the community at large. Foley has been a REALTOR® since 1987 and served as SCCAOR President in 1998.

“I am truly humbled and honored to receive the Byron Brawley Award,” she said. “Having served with this wonderful man when he was SCCAOR president, I know what a truly generous man he was. He was a man of integrity, honesty and a high moral compass. He dedicated his career to supporting and advancing professionalism within the REALTOR® community.”

Click here to see videos of each award presentation

Here is a summary of some new laws passed by the California Legislature that may affect REALTORS® in 2019. You can view an even larger list on C.A.R.’s website and you can read the full text of each law here.

 


Civil Liability: Liability of real estate agents for sexual harassment expanded

Even if a business, service, or professional “relationship” does not presently exist, a real estate agent (and “investor” among other persons) may be liable for sexual harassment when he or she holds himself or herself out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a third party. This law eliminates the element that the plaintiff prove there is an inability by the plaintiff to easily terminate the relationship. (Senate Bill 224)


Common Interest Developments: Financial review on a monthly basis and other anti-fraud precautions 

This law requires HOA boards to review on a monthly basis the association’s accounts and reserves; requires fidelity bond coverage for directors, officers, and employees to be maintained equal to three months’ reserves; and requires a manager to obtain written board approval before they may transfer association funds of $10,000 or more. (Assembly Bill 2912)


Employment: Discrimination and harassment

Prohibits an employer from requiring the execution of a release or non-disparagement agreement in exchange for any condition of employment. Broadens the definition of harassment to include any type of harassment, not merely sexual, for which an employer may be responsible when committed by a nonemployee. Explains in detail the legal standards constituting sexual harassment by citing and affirming various court cases. (Senate Bill 1300)


Employment: Sexual harassment training requirements Expanded By January 1, 2020.

Employers who employ 5 or more employees, including temporary or seasonal employees, must provide at least 2 hours of sexual harassment training to all supervisory employees and at least one hour of sexual harassment training to all nonsupervisory employees by January 1, 2020, and once every 2 years thereafter. (Senate Bill 1343)


Financial Disclosures: Foreign language translations for loan modifications

This law requires financial institutions to provide specified mortgage loan modification documents in the same language as the negotiation if the terms of negotiation are conducted in Spanish, Chinese, Tagalog, Vietnamese, or Korean. Currently, these disclosures are required only when a loan is originated. The law is also updated to include the Loan Estimate and Closing Disclosure forms in addition to the Good Faith Estimate. (Senate Bill 1201)


Insurance: Fires and other natural disasters: Eight new laws to strengthen the rights of homeowners

With wildfires and other disasters devastating areas across the state, insurers have employed various tactics to avoid paying out on claims and to minimize their losses in the future. This set of eight new laws attempts to ensure that a homeowner who has purchased insurance will realize the benefits of their policy and will not be improperly or unfairly denied coverage presently or in the future.

(View links to all 8 laws on C.A.R.’s website)


Real Estate Law Clean-up: Updates the real estate law to make it clearer and conform it to existing practice.

This C.A.R. sponsored “clean-up” legislation updates the real estate law to conform it to existing practice, eliminates antiquated or confusing laws, clarifies existing law, and introduces plain language where appropriate.

Among the more important changes: This law reiterates that existing law permits agents and brokers to establish their working relationship as one of either independent contractor or employment: it consolidates real estate definitions across a range of laws; and it resolves a variety of specific issues caused by confusing and antiquated laws. (Assembly Bill 1289)


Real Estate Law Clean-up: Independent Contractor Relationship Reaffirmed: New Private Transfer Fees Outlawed

This C.A.R. sponsored law prohibits developers from creating new property covenants, conditions, or restrictions that force subsequent owners to pay specially designated fees every time the property is transferred, unless the fee provides a “direct benefit” to the property, as defined in federal law. (Assembly Bill 2884)


Sexual Harassment: Liability for real estate agents expanded

Even if a business, service, or professional “relationship” does not presently exist, a real estate agent (and “investor” among other persons) may be liable for sexual harassment when he or she holds himself or herself out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a third party. This law eliminates the element that the plaintiff must prove there is an inability by the plaintiff to easily terminate the relationship. (Senate Bill 224)

Code of Ethics Case Interpretations

This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Case #1-9: Ex​clusive Listing During Term of Open Listing

During a Board of REALTORS® luncheon, REALTOR® A described to those at the table an old house in a commercial area which was open listed with him and invited the others to cooperate with him in selling the property. REALTORS® X and Y said they also had the property open listed but had found very little interest in it. REALTOR® B made no comment, but feeling he could find a buyer for it, went to the owner and discussed the advantages of an exclusive listing. The owner was persuaded and signed an exclusive listing agreement with REALTOR® B, telling him at the time that he had listed the property on an “open” basis for 30 more days with REALTORS® A, X, and Y. REALTOR® B’s comment was, “Just don’t renew those open listings when they expire.”

A few days later, REALTOR® A brought the owner a signed offer to purchase the property at the asking price. The owner told REALTOR® A that he now had the property exclusively listed with REALTOR® B, and asked him to submit the offer through REALTOR® B. Before REALTOR® A could contact REALTOR® B, REALTOR® B had taken another offer to purchase the property at the asking price to the owner. Confronted with two identical offers, the owner found both REALTOR® A and REALTOR® B expected full commissions for performance under their respective existing listing agreements. The owner filed an ethics complaint with the Board of REALTORS® alleging violations of Article 1 of the Code of Ethics because of the difficult position he had been placed in by REALTOR® A and REALTOR® B. The owner alleged neither of them had warned him that he might be liable for payment of more than one commission.

What do you think the Hearing Panel decided? Click here to find out.

In reviewing the actions of REALTOR® A, the Hearing Panel found that he was not at fault; that he had performed as requested under his listing agreement. On the other hand, it was the conclusion of the Hearing Panel that REALTOR® B had violated Article 1 by failing to advise the owner of his potential commission obligation to the other listing brokers when the client told him other listing agreements were in force.

The Hearing Panel pointed out that because of REALTOR® B’s omission his client, through no fault of his own, may have incurred legal liability to pay two commissions; that REALTOR® B should have advised the owner of his potential liability for multiple commissions; and that by not doing so REALTOR® B had failed to protect his client’s interests as required by Article 1.

Gen Mem Banner

Thank you to all our members who came out to our first General Membership Meeting of 2019. We were welcomed by our 2019 President, Gustavo Gonzalez, who shared some SCCAOR updates and information on all the SCCAOR Committees. This meeting featured a special presentation from Carl Guardino, CEO of the Silicon Valley Leadership Group. We also heard a C.A.R. update from Rick Smith, a local government affairs update from Chrissy Garavaglia, an MLSListings update from Karl Lee, and a Commercial Council update from William Chea.

Click here to download a copy of Carl Guardino’s presentation.

Click here to download a copy of the MLSListings update.

Watch a copy of the Facebook Live Stream below:

Code of Ethics Case Interpretations

This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Case Standard of Practice #1-4: Fidelity to Client

Client A contacted REALTOR® B to list a vacant lot. Client A said he had heard that similar lots in the vicinity had sold for about $50,000 and thought he should be able to get a similar price. REALTOR® B stressed some minor disadvantages in location and grade of the lot, and said that the market for vacant lots was sluggish. He suggested listing at a price of $32,500 and the client agreed.

In two weeks, REALTOR® B came to Client A with an offer at the listed price of $32,500. The client raised some questions about it, pointing out that the offer had come in just two weeks after the property had been placed on the market which could be an indication that the lot was worth closer to $50,000 than $32,500. REALTOR® B strongly urged him to accept the offer, stating that because of the sluggish market, another offer might not develop for months and that the offer in hand simply vindicated REALTOR® B’s own judgment as to pricing the lot. Client A finally agreed and the sale was made to Buyer C.

Two months later, Client A discovered the lot was no longer owned by Buyer C, but had been purchased by Buyer D at $55,000. He investigated and found that Buyer C was a brother-in-law of REALTOR® B, and that Buyer C had acted on behalf of REALTOR® B in buying the property for $32,500.

Client A outlined the facts in a complaint to the Board of REALTORS®, charging REALTOR® B with collusion in betrayal of a client’s confidence and interests, and with failing to disclose that he was buying the property on his own behalf.

At a hearing before a panel of the Board’s Professional Standards Committee, REALTOR® B’s defense was that in his observation of real estate transactions there can be two legitimate prices of property—the price that a seller is willing to take in order to liquidate his investment, and the price that a buyer is willing to pay to acquire a property in which he is particularly interested. His position was that he saw no harm in bringing about a transaction to his own advantage in which the seller received a price that he was willing to take and the buyer paid a price that he was willing to pay.

What do you think the Hearing Panel decided? Click here to find out.

The Hearing Panel concluded that REALTOR® B had deceitfully used the guise of rendering professional service to a client in acting as a speculator; that he had been unfaithful to the most basic principles of agency and allegiance to his client’s interest; and that he had violated Articles 1 and 4 of the Code of Ethics.

The Santa Clara County Association of REALTORS® (SCCAOR) installed Gustavo Gonzalez as its President during an evening ceremony at Villa Ragusa in Campbell on January 24. He will serve as the 2019 President of SCCAOR, a real estate trade organization that represents over 6,400 REALTOR® and Affiliate members in Santa Clara County.

Gustavo Gonzalez photo“We are so fortunate to have a passionate leader like Gustavo Gonzalez as our President,” said Neil Collins, SCCAOR CEO. “He has served as a civic leader while on the Alum Rock School board, he has provided affordable housing as a property manager, and he has been a local REALTOR® for over 18 years. I can’t think of anyone more qualified to represent our members.”

Gonzalez is the Broker/Owner of Valley View Properties based in San Jose. He served on the SCCAOR Board of Directors from 2007 to 2009 and was Vice President in 2014 and President-Elect in 2018. He has also been a member of the SCCAOR Professional Standards Committee since 2008.

“Family has always been an important part of my life,” said Gonzalez. “My theme this year as President is ‘The REALTOR® Familia – Coming together is a beginning, keeping together is progress, working together is a success.’ I look forward to a great year of collaboration and teamwork with SCCAOR’s Directors, Committee Chairs, Staff and Members. We are only limited by our imagination!”

SCCAOR Directors group photo

Other SCCAOR Officers that were installed include Sandy Jamison (President-Elect), William Chea (Vice President), and Stephen Theard (Treasurer/Secretary).

They will be joined by SCCAOR Board of Directors, which includes: Kip Barnard, Frank Cancilla, Helen Chong, Kevin Cole, Teressa Francis, Doug Goss, Gene Hunt, Don Jessup, Trisha Motter, Gabrielle Perez, Tam Quach, William Rehbock, Rick Smith, and Mark Von Kaenel.

Hemel photoHemal Sheth has joined SCCAOR as our new Membership Coordinator. Working alongside our Membership Team, Hemal will assist Association members with any questions or issues about their membership.

“I am happy to join the SCCAOR Team and I look forward to helping our members succeed and get the most out of their membership,” said Sheth.

“Hemal is a great addition to our Membership team,” said Tracey Lee, Membership Services Manager. “His background in sales and customer service will be a great benefit to our organization.”

In his free time, Hemal enjoys sports such as football, baseball, cricket, and tennis. He is also a cyclist who enjoys long bike rides.

“For the last four or five years I have participated in the ‘Tour de Cure’ which is the signature fundraising event for the American Diabetes Association,” he said. “The 2018 event was a huge success. We rode for over 50 miles and raised over $1000.”