NEW PODCAST & FAQS: NAR Code of Ethics 10-5 FAQs

Questions About Realtor Code of Ethics Standard of Practice 10-5 Approved Recently by the NAR Board of Directors

What recommendations were presented by the Professional Standards Committee at the recent NAR Convention to the NAR Board of Directors?

The Committee presented a package of recommendations concerning, broadly, the Code of Ethics’ applicability to discriminatory speech and conduct. At its November meeting, the NAR Board of Directors overwhelmingly approved all the Committee’s recommendations.  KAAR is fortunate to currently have two NAR Directors, 2020 President Jim Oakley and 2020 President-elect Shannon Foster-Boline that were able to fully participate in the recommendation and approval process.

Why was the Professional Standards Committee looking at this issue?

During the social unrest throughout the nation in late spring and summer of 2020, NAR received an unprecedented number of complaints about REALTORS® posting abhorrent and repugnant discriminatory speech and conduct online, especially on social media. Local and state associations, including KAAR, experienced a similar influx of these complaints. A local association of REALTORS® wrote to NAR President Vince Malta requesting that NAR consider the Code of Ethics’ applicability to this type of speech and conduct.

A special meeting of the NAR Professional Standards Committee was held that included a panel discussion on race, real estate, and association leadership. The Committee ultimately referred the issue of the Code’s applicability to discriminatory speech and conduct to the Interpretations and Procedures Advisory Board for their review.

The Advisory Board met virtually five times, and engaged in numerous discussions on the Hub, in order to create a package of recommendations. The recommendations were thoroughly vetted by attorneys within and outside the Realtor organization. The Professional Standards Committee met in a special meeting in early October and approved all the recommendations of the Advisory Board. Six of the eight recommendations approved by the Committee required approval by the NAR Board of Directors, who considered and overwhelmingly approved the recommendations during their meeting on November 13, 2020.

What do the policies approved by the Board of Directors include?

The new or amended policies can be grouped into three broad categories that are discussed below:

1.     Changes to the Code of Ethics’ applicability to a REALTOR®’s activities;
2.     A new Standard of Practice under Article 10 prohibiting discriminatory speech and conduct; and,
3.     Revisions to the definition of “Public Trust."

Changes to the Code of Ethics’ applicability to a REALTOR®’s activities

Previously, Policy Statement 29 in the Code of Ethics and Arbitration Manual limited the applicability of the Code to real estate-related activities and transactions involving REALTORS®. As such, members could engage in conduct and speech that is discriminatory and abhorrent, but unless it could be tied to a real estate-related activity or transaction, the Code of Ethics, specifically Article 10, did not apply. The NAR Board of Directors approved a revised policy that expands applicability to all of a REALTOR®’s activities. While the Code’s applicability has expanded, most Articles and Standards of Practice remain specific to real estate transactions and other real estate-related activities.

A new Standard of Practice under Article 10 prohibiting discriminatory speech and conduct

The Board of Directors approved a new Standard of Practice under Article 10:

Standard of Practice 10-5

REALTORS® must not use harassing speech, hate speech, epithets, or slurs based on race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.

This Standard of Practice directly flows from the requirement to not deny equal professional services or be parties to a plan to discriminate. Specifically, bias against protected classes revealed through the public posting of hate speech could result in REALTORS® not taking clients from certain protected classes or not treating them equally, which would lead to violations of the Fair Housing Act due to overt discrimination or disparate impact.

Revisions to the definition of “Public Trust”

The Board of Directors approved expansion of the definition of “public trust” to include all discrimination against the protected classes under Article 10 of the Code of Ethics and all fraud.

Previously, the definition of “public trust” included demonstrated misappropriation of client or customer funds or property, willful discrimination, or fraud resulting in substantial economic harm. The recommendation expanded the definition to include all discrimination against the protected classes under Article 10, and all fraud. As a result, associations are now required to share with the state real estate licensing authority final ethics decisions holding REALTORS® in violation of the Code of Ethics in instances involving real estate-related activities and transactions where there is reason to believe the public trust, as expanded, may have been violated.

When did these changes go into effect? Can the new Standard of Practice apply to behavior that occurred before it was passed?

The changes to Policy Statement 29 and the new Standard of Practice 10-5 went into effect immediately upon final approval by the Board of Directors. These new ethical obligations do not apply to behavior that occurred before they became effective.

The new Standard of Practice seems to limit my right to free speech as established by the First Amendment to the Constitution. How can NAR legally adopt a policy like this?

The First Amendment provides that neither the United States Congress nor any state may abridge the freedom of speech of American citizens. With some exceptions, the First Amendment does not prohibit a private organization from restricting the speech of its members, employees, or users. NAR is a private association that is supported by dues from members, is not exercising any governmental function, and has no subpoena power or other powers generally available to state agencies. As such, the First Amendment does not preclude NAR from imposing this ethical duty as a condition of membership.

I should be able to say whatever I want on my personal social media profile. It doesn’t impact my ability to do my job. Why is what I say there now subject to the Code? This is going too far.

The Board of Directors discussed that a REALTOR®’s speech and conduct reflect on the REALTOR® organization whether said publicly on a business social media profile, or privately on a personal one. According to the Preamble of the Code of Ethics, REALTORS® should be guided by the spirit of the Golden Rule of treating others as one would like to be treated. When a REALTOR® pledges to abide by the Code of Ethics, the highest principles and ethics of REALTORS® must followed in all their activities, and cannot be abandoned in a profession dedicated to protecting the best interests of consumers.

Put simply, when one REALTOR® engages in discriminatory speech and conduct, those actions demonstrate to consumers that they represent the actions of REALTORS® collectively. The REALTOR® brand is built on ethics and integrity. Discriminatory speech and conduct to the contrary depletes the strength of that brand. It is incumbent upon our organization to set the bar high, and communicate those elevated standards, to protect the REALTOR® brand and ensure its strength endures for years to come.

Additionally, this change does not mean that the Code of Ethics will apply in all portions of a REALTOR®’s personal life as many of the Code’s provisions are specifically tied to real estate and real estate transactions.

Standard of Practice 10-5 doesn’t seem to have anything to do with Article 10. I’m able to say what I want and still not discriminate against clients that are members of the protected classes. How does this new Standard of Practice fit?

Article 10 provides as follows:

REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. 

REALTORS®, in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.

Standard of Practice 10-5 directly flows from the requirement to not deny equal professional services or be parties to a plan to discriminate. Specifically, disparaging a particular protected class is evidence of one’s inability to treat them equally. In addition, bias against protected classes revealed through the public posting of hate speech could result in REALTORS® not taking clients from certain protected classes or not treating them equally, which would lead to violations of the Fair Housing Act due to overt discrimination or disparate impact.

Doesn’t the nature of Standard of Practice 10-5 invite the potential for inconsistent enforcement across the country?

The Board of Directors approved adoption of a new Appendix XII to Part Four of the Code of Ethics and Arbitration Manual which lays out, with great specificity, the proper application of Standard of Practice 10-5 and revised Policy Statement 29 such that consistent application of these policies can be achieved.  KAAR’s Grievance and Professional Standards Committees undergo annual mandatory training.  This training is scheduled with a national instructor for mid-January and will take place before any matter is heard regarding Standard of Practice 10-5. 

Standard of Practice 10-5 says “REALTORS® must not use harassing speech, hate speech, epithets, or slurs…”. How are those terms defined?

The Board of Directors approved adoption of a new Appendix XII to Part Four of the Code of Ethics and Arbitration Manual which lays out, with great specificity, the proper application of proposed Standard of Practice 10-5, including an explanation of the terms used within the Standard of Practice, such that consistent application of these policies can be achieved.

Doesn’t this mean that if I post my opinion online and someone doesn’t agree with it, that I can lose my membership and be forced out of the business? Can’t someone make up a story about me saying something discriminatory and use the ethics complaint process to hurt my career?

As with any alleged Code violation, ethics complaints alleging a violation of Article 10 as interpreted by Standard of Practice 10-5 will be processed consistent with the local or state association’s professional standards enforcement process, which affords all parties a full and fair opportunity to present their case, defend themselves, provide evidence and witnesses, etc.  A burden of proof must be met by the complainant in order to find a violation of the Code of Ethics. In addition, there is a limited appeal process to the KAAR Board of Directors.

Additionally, membership in an association of REALTORS® is voluntary, and any discipline imposed does not automatically impact an individual’s ability to hold a real estate license.  KAAR has no authority over an individual real estate license.  Only the state’s licensing authority, the Tennessee Real Estate Commission, can revoke or suspend a real estate license.

This feels like a knee jerk reaction in regards to the social unrest going on throughout the nation. Aren’t these policies just a reflection of the organization trying to be politically correct?

The 2019 Newsday investigation of discrimination in real estate in Long Island, New York, and the events of 2020 have merely shed a light on discrimination that has persisted historically but that many were not in a position to experience or see happening. The Code of Ethics has embodied principles of fair housing for decades, and as such, these policies are consistent with the spirit and intent of the Code, as well as the guidance embodied in the Golden Rule.

How do these policies impact consumers?

When one REALTOR® posts discriminatory speech or conduct online, that content becomes reflective of REALTORS® on the whole. Left unchecked, those statements become who we are as an organization, and further reinforce the barriers to homeownership experienced by so many Americans. These policies are one very impactful way we can advance equity and fairness in the real estate industry, and ensure access to the American Dream for all.