Understanding the Realtor® Code of Ethics: Article 17 – Arbitration

So, here is my “fashionably late” (and final) Understanding the Realtor® Code of Ethics post – I have made you all wait over a month.

Intentionally Fashionably late? Really? No. I was not trying to be late. But there are 2 factors that came into play:

Business really started picking up in the Colorado Springs Real Estate Market.
Article 17 gave me “drain bamage” – For as much as I understand it, I had a difficult time turning this one into understandable language.
The Realtor® Code of Ethics were created by the National Association of Realtors as a set of ethical guidelines for Realtors®. These guidelines are continually perfected and updated.
This is a discussion of the last Article – Article 17.

Article 17
In the event of contractual disputes or specific non-contractual disputes as defined in Standard of Practice 17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTORS® shall submit the dispute to arbitration in accordance with the regulations of their Board or Boards rather than litigate the matter.
In the event clients of REALTORS® wish to arbitrate contractual disputes arising out of real estate transactions, REALTORS® shall arbitrate those disputes in accordance with the regulations of their Board, provided the clients agree to be bound by the decision.
The obligation to participate in arbitration contemplated by this Article includes the obligation of REALTORS® (principals) to cause their firms to arbitrate and be bound by any award.

Ultimately, this article states that any contract dispute between Realtors® should go to arbitration (per their specific Board of Realtors® regulations) instead of going to litigation. Furthermore – arbitration can only be filed under certain circumstances.

This article deals less with “ethics” violations and more with “monetary” disputes between Realtors®. And even now, Realtors® are turning more to mediation before arbitration. According to NAR:
If the parties resolve their dispute through mediation, they sign an agreement, spelling out the terms of their settlement. When a dispute is successfully resolved through mediation, no arbitration hearing is necessary. Depending on the policy of your Association, mediation may be offered either before or after the Grievance Committee has reviewed an arbitration request. Mediation can also be offered without a request for arbitration being filed.”

This article covers the following situations:

  • If a Realtor® files for litigation and refuses to withdraw it in favor of arbitration, then that Realtor® is basically refusing to arbitrate.
  • Arbitration does not need to happen if all parties involved agree to it in writing – to the local Board.
  • “REALTORS®, when acting solely as principals in a real estate transaction, are not obligated to arbitrate disputes with other REALTORS®” unless there is a specific written agreement to the contrary.
  • Regarding state-to-state disputes and obligatory arbitration:
    Realtor® Rudy lives in one state and has a contract dispute with Realtor® Ron, who lives in another state (that does not have an “established inter-association arbitration agreement” with Rudy’s state). Realtor® Rudy agrees “to submit to the jurisdiction of, travel to, participate in, and be bound by any resulting award rendered in arbitration conducted by the respondent(s) REALTOR®’s association, in instances where the respondent(s) REALTOR®’s association determines that an arbitrable issue exists.”
  • Of course, there are exceptions to this article. These usually exist when there is a commission dispute between Realtors® – even though there is no existing contract between them.

      Often times Article 17 arbitration has to do with procuring cause disputes between Realtors®.
      Another exception to mandatory arbitration happens when the dispute is between 2 Realtors® in the same firm. In that case, arbitration is voluntary.
      Finally, arbitration can only happen if the dispute arises out of the Realtors’® relationship as Realtors®. This article has nothing to do with personal, or non-Realtor® based vendettas.

    When a dispute, under Article 17, DOES go to arbitration, it is treated a little differently than an ethics complaint. Whereas an ethical violation needs to be proven by “clear, strong and convincing” evidence, an arbitration hearing relies more on the same standards that civil courts use in their cases – “greater weight of evidence” or “more likely than not.” Whatever is decided CAN be enforced by the courts.

    Please take a moment to check out my previous posts on Understanding the Realtor® Code of Ethics.

    Posted By: Mariana Wagner – Colorado Springs Real EstateMonument Real Estate


    About Mariana

    I am a Mom, Wife, Real Estate Agent Trainer and Mortgage Lender. Find me at http://www.marianawagner.com
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