Inman broke the news this morning that licensed real estate agents and brokers in Michigan have brought litigation against the National Association of REALTORS® (NAR) organizations regarding the requirement to be a Realtor in order to access MLS services.

This is the rise of an old legal issue established by litigation in Georgia (Thompson) and California (Paulson). NAR’s position is that the requirement to join the association was permissible as long as membership was reasonable and non discriminatory. In the late 70s, two courts in California ruled that tying NAR membership to MLS access was a violation of the Cartwright Act. NAR won cases in Iowa and New Jersey. Basically, the courts are split on the issue. 

In 1991, the Thompson case in Georgia added a wrinkle to the legal stipulation beyond the antitrust claim of “tying and group boycott” whereby the judge in the case indicated that if the MLS has “market power” that is part of the consideration. There is also some legal consideration to the lack of any competition to NAR. Consider this for a moment in the wake of the evolution of massive MLSs and two decades of consolidation. The Thompson ruling also covers Alabama and Florida because they are part of the federal district.

In 1994, at the NAR Midyear convention (I’m not sure how many old-timers are still in the business from this event), the NAR changed its MLS policy nationally, indicating that MLSs may choose to admit non-Realtor members as MLS participants and subscribers. Like all NAR policies, there is a choice to make the policy mandatory or optional. For example, Clear Cooperation is Mandatory. Admitting non-Realtor Participants and Subscribers to the MLS is non-mandatory. So each MLS makes a choice. 

There was fear that if membership was not mandatory, the Association would lose its members. That did not happen, and I can tell you why…

The Association offers many additional services that the MLS does not. However, there are often (but not always) two specific services of the Association without which it would be nearly impossible to operate a real estate business: Association Forms and Association Lockboxes. 

legal housing agreement

Forms and Lockbox services are as integral to operating a real estate business as the MLS itself, but they are often carved out as Association services. Legal support from the Association and Arbitration on Commission disputes are also super valuable to brokerage operations. In my opinion, MLS participation without these other services would blunt the efforts of listing and selling homes without standard agreements, or affect the access of properties for showing homes to buyer clients. MLS data without these services is like a bicycle without pedals; you can ride around, but you will not get very far. 

There is a new sheriff in town called the Department of Justice. They are bolder than ever in their attacks, and NAR’s legal defense fund is crippled today. If NAR needs to fight against their members in court – to be seen in more federal cases which are copycats to the Michigan case – it will hurt the reserves of the organization in significant ways.

The good news is that NAR has had a lot of success in federal courts defending the services of the Association. A win in Michigan could be a tide-turner against the findings in Thompson and Paulson. Clearly the Association has extended the option of non-membership in their model policy. 

More good news is that the real estate media and conferences will have a new thing to debate – and a new case to follow in the wake of the commission litigation. 

What would real estate be without its unending existential threats from the legal system?