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By: Stephen J. Nash, Esq.
Nash Law Firm
nash@nash-law.com

When the real estate economy is struggling, the focus is on finding clients. But you must make sure that is not your only focus. When times are tough, there are more disputes. Disputes lead to ethics complaints. It is extremely important you avoid common mistakes that real estate agents/brokers make that make you an easy target. Even how you respond to an ethic's complaint can help your situation or make it substantially worse.

An ethic’s complaint can come from a client, from the buyer or seller that you did not represent or from another real estate agent/broker. More and more the complaints are being originated from an agent/broker probably as result of the competitive pressures on everyone in the industry.

When a Complaint is Made Against You 

When an ethic complaint is made, you will receive a notice that sets forth the complaint against you and sets out the ethical cannons that you allegedly broke. In my experience, the responses made are often poorly thought out and poorly written. You must make the time and effort to properly respond. The following are some tips to help you effectively respond to an ethic’s complaint: 

 1. Type your response – it is hard to be persuasive if the person reading your response can’t read it.

2. Focus on the allegations that relate to ethic violations. In many situations the ethic’s complaint will ramble on about things that have nothing to do with an actual ethical violation.  Resist the urge to answer every allegation made and make sure that you respond to each allegation made that relates to the alleged ethical violation. If you try to do both, you have to be careful that your response to the ethical claims is not buried among other verbiage.

3. If you refer to documents, attach copies to your response.

4. Organize your response to make it easy to read and to follow.

5. Read the ethical cannons that you are alleged to have violated. Identify the facts you need to establish in order to show that a violation did not occur.

6. If you did violate an ethical cannon don’t try to make a fight that you cannot win. In many cases,you are better off owning up to the violation and, instead, focusing on showing that it was an innocent violation and/or did not cause any harm. 

I have seen many cases where the response actually set out facts that gave grounds for additional ethic violations. Obviously, the agent/broker did not realize that the response would result in additional violations being added but once you provide the facts that show a possible violation, MAR will normally point out to the complainant the possible additional violations and will allow them to amend their complaint to include the additional violations. What are the odds that the complainant won’t add the additional violations? If you provided the facts that show the violation it makes it almost impossible to later argue that there was no violation.

Common Violations to Avoid 

One of the most common violations is a failure to have all agreements in writing. When an ethic’s complaint is made, your file becomes an open book. The panel is not restricted to looking at just what the complainant is focusing on. If there was an agreement that comes up that was not in writing, it is an easy violation to tag you with. In almost every real estate file I have gone through, I have found oral agreements. At the time they may seem minor or common but if they end up in front of an ethic’s panel you will lose. Common examples include extending the closing date, MLS changes or any agreement made with the opposing agent (often seeking information or documents).

A second common violation is the failure to provide a copy of the purchase agreement and addendum's to your client in a timely manner. 

A third common violation is a failure to respond to your client. It is a natural reaction to want to avoid the client who is upset or if you only have bad news to deliver. But avoiding a client is a sure way to have an ethic’s violation filed against you.

Some Suggestions to Help You Avoid an Ethic Complaint 

There are many things that can be done to help avoid having to face an ethic complaint or will help provide you with a better defense. The following are some of those suggestions: 

1. Make sure copies of every important document is given to your client. Have a system in place that is followed in every case.  When in doubt, give them a copy.

2. Do not rely on oral agreements. It takes a little extra time but every oral agreement leaves you vulnerable. If you could tell  which one would come back to haunt you it would be easy to pick and chose which agreements need to be in writing.  Unfortunately, by the time you know there is a problem, it is too late.  The only real protection is to never rely on an oral agreement.

3. Take notes. It takes extra time and effort but it is well worth it. Many ethics’ complaints come down to “he said, she said” disputes. If you have notes to back up your recollection of meetings, phone calls and what was said your credibility will  be much higher and you are more likely to prevail. You don’t have to be great at taking notes, anything you can do is better than nothing.  Taking notes is a habit that you can learn, will make you look more professional and will discourage claims against you because they believe you to be detail-oriented. The client does not know whether you take good notes or not but they certainly are aware that you have taken notes.

4. Don’t throw documents away. It is difficult to defend against a claim when you don’t have key documents.

5. Regularly communicate with your clients. When you are hired by a client take about how and how often you will communicate with your client even if you have no new news. E-mails are great in that you have a record of your communications (save the e-mails received and sent). 

Summary 

Nobody wants to receive an ethics complaint and while you cannot totally guard against a complaint, you can take a number of steps to reduce or avoid such a complaint. If you receive an ethic’s complaint it is extremely important that you carefully prepare a response or have someone prepare it for you.