Preview
FILED: WESTCHESTER COUNTY CLERK 07/14/2018 08:37 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018
EXHIBIT 37
FILED: WESTCHESTER COUNTY CLERK 07/14/2018 08:37 PMane INDEX NO. 60767/2018
/O/GA4O E AI TAO EIAI_ITIhlAIE1At I II ECThn \ Afank:nnean
NYSCEF
The
~~The DOC. NO. Post
Washington 43 RECEIVED NYSCEF: 07/14/2018
REALTORS FIGHTING NEW
RULES
By Elizabeth Lesly May 26, 1990
Harvey Heino has been selling residential real estate in Brooklyn for the last 15years with few
incidents. To hear him tell it, the former Wall Street clerk, who owns his own brokerage, is a
thoroughly unremarkable member of his trade.
"We' we' ourselves,"
not working for the buyer or the seller. The truth is, re working for Heino
"We' deal."
said of a real estate agent's approach to a sale. re trying to make a
But if New York Secretary of State Gail S. Shaffer succeeds in pushing through a package of
rights,"
regulations that she tags a "consumer's bill of Heino's view of who an agent represents
would become so clearly illegal that he would either have to change his ways or lose his license.
Much of Shaffer's proposal restates existing laws, most significantly the centuries-old common law
agents'
of agency, which defines fiduciary responsibilities to their clients.
CONTENT FROM WELLS FARGO
startup."
-
"It takes a village to raise a Mary Wenzel, head of
Sustainability at Wells Fargo
Recid More
But points in her package -- first circulated in draft form to the real estate for
key industry
comment in December -- would alter the most residential real estate transactions
drastically way
are structured in New York, and they reflect issues being debated across the country.
Real estate trade groups such as the National Association of Realtors and the New York State
Realtors Association oppose Shaffer's proposal, charging that she doesn't have the authority to
FILED: WESTCHESTER COUNTY CLERK EI/07/14/2018 08:37 PM INDEX NO. 60767/2018
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AIE\A/ DI II EC
TL^ \A/nak:na4^n
I‰ne
NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018
hand down such far-reaching rules for the 180,000 real estate license holders her agency regulates,
that she doesn't understand their business and that the rules would be a death knell to residential
real estate sales in the state.
A state legislature oversight committee agreed, saying itwas the legislature's job to make such
rules, not Shaffer's. But the committee's word is not legally binding; Shaffer can issue the rules,
and the real estate groups can challenge them at the agency level before taking their fight to a state
court. A spokesman for the Realtors said the court challenge could come before the final draft is
issued, expected sometime this year.
Shaffer's proposal would:
Require written disclosure to buyers of an agent's fiduciary responsibility to the seller. The Federal
Trade Commission in 1983 concluded that 71 percent of all buyers assumed wrongly that the
selling broker represented their interests.
Ban sub-agency relationships. Under current practice in New York and most other states, brokers
who show properties listed by another broker on the Multiple Listing Service automatically act as
sub-agents to that broker -- and represent the seller.
they ultimately
Make dual-agency relationships clearly illegal. An agent would be barred from representing both
the buyer and the seller in a transaction, since he can't serve both under the law of agency.
Make self-dealing illegal, because the agent cannot fulfill fiduciary duties to the client ifhe is
seeking the best deal for his own interests, Shaffer said. The common example is that of a broker
offering to buy the property he lists.
codifying,"
"Most of what we have here is current existing law that we are Shaffer said. "The
industry has gotten away from these laws {of agency} to such a degree now that they don't even
understand what is legal and illegal anymore... . The violations are so widespread, and not always
is."
even intentional. They truly do not understand in many cases what a fiduciary's responsibility
None of this sits well with broker Heino, who said he should not have to let the buyer know that he
explained'
is representing the seller because the buyer "is not paying {my fee}, so why should it be explained?
life},"
"Why does it all have to be in black and white? There are certain chances {you take in he
said.
The New York State Association of Realtors, which represents about 25 percent of the state's real
estate licensees, contends that agents like Heino are not the norm, and not members of the
association.
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FILED: WESTCHESTER COUNTY CLERK EI/07/14/2018 08:37 PM INDEX NO. 60767/2018
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NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018
In its fight against the proposed rules, the state group has the vigorous support of the National
Association of Realtors, because the NAR recognizes that losing the fight in New York could mean
similar losses in other states, said Robert D. Butters, NAR's deputy general counsel.
"If we believe that what happens in New York is not good public policy, we will encourage other
track,"
states not to follow the same Butters said. "And we will work to change things in New
York."
"These proposed regulations, if enacted and interpreted according to their plain meaning, will
render invalid in New York generally accepted legal and ethical norms that govern the practice of
States,"
real estate brokerage throughout the United wrote NAR's executive vice president, William
D. North, in a letter to Shaffer.
Not everyone in the state's real estate industry shares the NAR's view. In New York and elsewhere,
proponents of new ways of buying real estate, such as brokers representing buyers, are looking to
regulations requiring disclosure of fiduciary duty and the abolishment of sub-agency to spur
alternative arrangements.
James Arrow, a buyer's broker in Rochester, N.Y., has fought with tradition-minded agents in his
market for years, and charges harassment and restraint of trade at the hands of agents who refuse
to deal with alternative brokers.
Larry Outlaw, president of the Real Estate Educators Association and director of education and
licensing for the North Carolina Real Estate Commission, said the NAR and state groups fear that a
ban on sub-agency and a boom in buyer's brokerage will weaken their influence.
There is "concern that this could create more contentiousness {between real estate licensees} in
other,"
real estate transactions by pitting one against the said Outlaw. "One other concern
expressed by the real estate industry where these laws are proposed is that by requiring agency
disclosure to prospective buyers, itwill make prospective buyers more suspicious of other agents
and perhaps hamper the smooth conduct of real estate transactions. A majority of prospective
capacity."
buyers do not realize that the agent represents the seller in a sub-agent
In Hawaii, where recent laws make sub-agency optional under the Multiple Listing Service,
sub-agency,"
"approximately 90 percent of all listings there do not offer said Gail Lyons, a broker
in Boulder, Colo., who gives seminars on agency relationships all over the country.
Lyons sees much of what Shaffer is proposing in New York as part of a movement that is slowly
taking hold in the industry. "What appears to be happening nationally is a movement toward
sub-agency,"
buyer-agency as opposed to she said.
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FILED: WESTCHESTER COUNTY CLERK El 07/14/2018 08:37 PM INDEX NO. 60767/2018
7/O/O 4O DE AI mac I-ITINI
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NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018
In California, where fiduciary disclosure is now the law, 96 percent of buyers elect to go with a
buyer's broker, Lyons said.
scared?" I'
Amid all the debate, one of the few unworried brokers is Heino. "Me, he said. "No. I've
this."
been around too long. They can't pass most of
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Preview
FILED: WESTCHESTER COUNTY CLERK 07/14/2018 08:37 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018 EXHIBIT 37 FILED: WESTCHESTER COUNTY CLERK 07/14/2018 08:37 PMane INDEX NO. 60767/2018 /O/GA4O E AI TAO EIAI_ITIhlAIE1At I II ECThn \ Afank:nnean NYSCEF The ~~The DOC. NO. Post Washington 43 RECEIVED NYSCEF: 07/14/2018 REALTORS FIGHTING NEW RULES By Elizabeth Lesly May 26, 1990 Harvey Heino has been selling residential real estate in Brooklyn for the last 15years with few incidents. To hear him tell it, the former Wall Street clerk, who owns his own brokerage, is a thoroughly unremarkable member of his trade. "We' we' ourselves," not working for the buyer or the seller. The truth is, re working for Heino "We' deal." said of a real estate agent's approach to a sale. re trying to make a But if New York Secretary of State Gail S. Shaffer succeeds in pushing through a package of rights," regulations that she tags a "consumer's bill of Heino's view of who an agent represents would become so clearly illegal that he would either have to change his ways or lose his license. Much of Shaffer's proposal restates existing laws, most significantly the centuries-old common law agents' of agency, which defines fiduciary responsibilities to their clients. CONTENT FROM WELLS FARGO startup." - "It takes a village to raise a Mary Wenzel, head of Sustainability at Wells Fargo Recid More But points in her package -- first circulated in draft form to the real estate for key industry comment in December -- would alter the most residential real estate transactions drastically way are structured in New York, and they reflect issues being debated across the country. Real estate trade groups such as the National Association of Realtors and the New York State Realtors Association oppose Shaffer's proposal, charging that she doesn't have the authority to FILED: WESTCHESTER COUNTY CLERK EI/07/14/2018 08:37 PM INDEX NO. 60767/2018 7/O/G/ 4O DE AI mac I-ITIhl AIE\A/ DI II EC TL^ \A/nak:na4^n I‰ne NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018 hand down such far-reaching rules for the 180,000 real estate license holders her agency regulates, that she doesn't understand their business and that the rules would be a death knell to residential real estate sales in the state. A state legislature oversight committee agreed, saying itwas the legislature's job to make such rules, not Shaffer's. But the committee's word is not legally binding; Shaffer can issue the rules, and the real estate groups can challenge them at the agency level before taking their fight to a state court. A spokesman for the Realtors said the court challenge could come before the final draft is issued, expected sometime this year. Shaffer's proposal would: Require written disclosure to buyers of an agent's fiduciary responsibility to the seller. The Federal Trade Commission in 1983 concluded that 71 percent of all buyers assumed wrongly that the selling broker represented their interests. Ban sub-agency relationships. Under current practice in New York and most other states, brokers who show properties listed by another broker on the Multiple Listing Service automatically act as sub-agents to that broker -- and represent the seller. they ultimately Make dual-agency relationships clearly illegal. An agent would be barred from representing both the buyer and the seller in a transaction, since he can't serve both under the law of agency. Make self-dealing illegal, because the agent cannot fulfill fiduciary duties to the client ifhe is seeking the best deal for his own interests, Shaffer said. The common example is that of a broker offering to buy the property he lists. codifying," "Most of what we have here is current existing law that we are Shaffer said. "The industry has gotten away from these laws {of agency} to such a degree now that they don't even understand what is legal and illegal anymore... . The violations are so widespread, and not always is." even intentional. They truly do not understand in many cases what a fiduciary's responsibility None of this sits well with broker Heino, who said he should not have to let the buyer know that he explained' is representing the seller because the buyer "is not paying {my fee}, so why should it be explained? life}," "Why does it all have to be in black and white? There are certain chances {you take in he said. The New York State Association of Realtors, which represents about 25 percent of the state's real estate licensees, contends that agents like Heino are not the norm, and not members of the association. I ILL+4~II VVVV VV ~VV LQLVII VVVIVVIi VlIVVILVI0 IIg I ILII IJJI IVVVI VIVVITVQVI i i V i IVC TVTV QQVVVVVVVV'UQVQVVI:IIVIO'UIIVVL VI I ~~~ QQIIII ILJLVIIPVQL~VVIIIIQIVlIIVVl I'VVI'VQ CI T FILED: WESTCHESTER COUNTY CLERK EI/07/14/2018 08:37 PM INDEX NO. 60767/2018 7/O/G/ 4O DE AI mac I-ITIhl sickensDI II EC TL^ \A/nak:na4^n I‰ne NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018 In its fight against the proposed rules, the state group has the vigorous support of the National Association of Realtors, because the NAR recognizes that losing the fight in New York could mean similar losses in other states, said Robert D. Butters, NAR's deputy general counsel. "If we believe that what happens in New York is not good public policy, we will encourage other track," states not to follow the same Butters said. "And we will work to change things in New York." "These proposed regulations, if enacted and interpreted according to their plain meaning, will render invalid in New York generally accepted legal and ethical norms that govern the practice of States," real estate brokerage throughout the United wrote NAR's executive vice president, William D. North, in a letter to Shaffer. Not everyone in the state's real estate industry shares the NAR's view. In New York and elsewhere, proponents of new ways of buying real estate, such as brokers representing buyers, are looking to regulations requiring disclosure of fiduciary duty and the abolishment of sub-agency to spur alternative arrangements. James Arrow, a buyer's broker in Rochester, N.Y., has fought with tradition-minded agents in his market for years, and charges harassment and restraint of trade at the hands of agents who refuse to deal with alternative brokers. Larry Outlaw, president of the Real Estate Educators Association and director of education and licensing for the North Carolina Real Estate Commission, said the NAR and state groups fear that a ban on sub-agency and a boom in buyer's brokerage will weaken their influence. There is "concern that this could create more contentiousness {between real estate licensees} in other," real estate transactions by pitting one against the said Outlaw. "One other concern expressed by the real estate industry where these laws are proposed is that by requiring agency disclosure to prospective buyers, itwill make prospective buyers more suspicious of other agents and perhaps hamper the smooth conduct of real estate transactions. A majority of prospective capacity." buyers do not realize that the agent represents the seller in a sub-agent In Hawaii, where recent laws make sub-agency optional under the Multiple Listing Service, sub-agency," "approximately 90 percent of all listings there do not offer said Gail Lyons, a broker in Boulder, Colo., who gives seminars on agency relationships all over the country. Lyons sees much of what Shaffer is proposing in New York as part of a movement that is slowly taking hold in the industry. "What appears to be happening nationally is a movement toward sub-agency," buyer-agency as opposed to she said. I ILL+4~II VVVV VV ~VV LQLVII VVVIVVICVlIVVILVI0 IIg I ILII IJJI IVVVI VIVVITVQVI CCV CIVC TVTV QQVVVVVVVV'UQVQVVI:IIVIO'UIIVVL VI I ~~~ QQIIII ILJLVIIPVQL~VVIIIIQIVlIIVVl I'VVI'VQ Vl T FILED: WESTCHESTER COUNTY CLERK El 07/14/2018 08:37 PM INDEX NO. 60767/2018 7/O/O 4O DE AI mac I-ITINI AIE\A/ DI II EC TL^ \A/nak:na4^n n^ne NYSCEF DOC. NO. 43 RECEIVED NYSCEF: 07/14/2018 In California, where fiduciary disclosure is now the law, 96 percent of buyers elect to go with a buyer's broker, Lyons said. scared?" I' Amid all the debate, one of the few unworried brokers is Heino. "Me, he said. "No. I've this." been around too long. They can't pass most of 4 0 Comments The story must be told. Your subscription supports journalism that matters. https://www.washing noredirect=on... tonpost.corn/archive/realestate/1990/05/26/realtors-fighting-new-rules/40a67226-2f52-4045-aa95-dc6938da3aed/? 4/4