NAR: ‘A Sales Recovery Did Not Occur in Midsummer;’ U.S. Pending Sales in July Were the Lowest on Record
The Northeast PHSI waned 1.4% from last month to 64.6, an increase of 2.4% from July 2023.
The legislative and judicial landscape continues to change for New York real estate licensees and the entire real estate industry. New developments are taking place each day and now, more than ever, it is important for real estate licensees and real estate professionals to keep up to date with all of the changes.
As discussed in previous columns, new decisions (DOS Decisions) issued by the New York State Department of State Office of Administrative Hearings relating to the fair housing complaints filed by the Department of State Division of Licensing Services (DLS) as a result of the Newsday Investigation (see https://bit.ly/38HiXog) continue to come down and it is important to review these decisions as they offer important guidance.
Additionally, new important legislation has been introduced that will greatly affect the real estate industry. On April 20th, the new rules relating to the implementation of “standardized operating procedures” for real estate brokerages are set to take effect. The requirement for the standardized operating procedures arose directly out of the fair housing investigation conducted by Newsday. HGAR’s in-house counsel, Brian Levine, Esq., provided a detailed review of the requirements under the new regulations in his April column.
DLS v. Anderson: Substantial Evidence and Disparate Treatment
In DLS v. Anderson (December 10, 2021) (see https://on.ny.gov/3JucvxJ), an Administrative Law Judge (“ALJ”) found that there was not substantial evidence that the agent engaged in discrimination in violation of federal and state fair housing laws. In New York, the New York State Division of Human Rights offers a publication entitled the “Fair Housing Guide” (see https://on.ny.gov/3O3597w). The Fair Housing Guide is an important resource and should be reviewed by all real estate licensees as well as any professional offering services in the field of real estate. In Anderson, the ALJ points out that it is the burden of the DLS “to prove, by substantial evidence, the truth of the charges set forth in the complaint.” The DLS alleged that the real estate licensee “demonstrated untrustworthiness and/or incompetence by engaging in unlawful discriminatory conduct with respect to her dealings with Mr. Williams and Mr. Fusco. To qualify for a real estate agent’s license, the respondent must be both trustworthy and competent in order ‘to safeguard the interests of the public.’ Real Property Law (“RPL”) § 441(1)(b).”
The DLS in Anderson alleged that the agent’s actions amounted to discriminatory behavior because of the disparate treatment of one customer over another. The agent required a loan pre-approval letter from the Black tester and did not require one of the White tester. The ALJ, citing the U.S. Supreme Court in Int’l Bhd. Of Teamsters v. United States (431 U.S. 324 (1977)), explains that “disparate treatment’ occurs when a person ‘treats some people less favorably than others because of their race, color, religion, sex, or national origin. Proof of discriminatory motive is critical.’” The ALJ, however, pointed out that while disparate treatment can be used as evidence of discrimination, “unlawful discriminatory conduct must be proven by substantial evidence.” While the ALJ did concede that the agent did engage in disparate treatment, it held that the DLS did not present sufficient evidence at the hearing establishing that disparate treatment by the agent was motivated by a discriminatory intent.
The ALJ focused on the facts and circumstances of the case and explained that the meetings with the respective clients occurred nearly three months apart. The ALJ pointed out that the agent was a newly licensed salesperson when meeting with the Black customer and while she did not require a loan pre-approval letter at first, when she asked her broker for guidance because she was new, she then ultimately requested a pre-approval from him. However, at the hearing, the agent testified that when she met with the White customer three months later, she felt more comfortable in assessing the situation herself and did not ask for one. The ALJ held that the agent’s testimony was credible and that the DLS, without offering sufficient evidence to establish discriminatory intent, did not establish that the agent intentionally discriminated against the Black customer.
DLS v. Nasti and Elliot: The Broker’s Duty to Supervise
In DLS v. Nasti and Elliot, the ALJ revoked the licenses of both the salesperson and the broker. In Nasti, the DLS complaint alleged that the respondent Anthony Nasti, a licensed associate broker, and David Elliot, a licensed real estate salesperson, engaged in unlawful discriminatory conduct, misleading, unauthorized, and unlawful advertising, and that Nasti failed to properly supervise respondent Elliot.
The salesperson was in contact with a person (i.e., Ms. Asari-Vojka) who was employed by the Malaysian government and who was assisting with an apartment search for a diplomatic couple. In Nasti, the ALJ points out that the salesperson asked about the couple’s country of origin “…and when he was advised it was Malaysia he told Ms. Asari-Vojka that the management of the building in question did not accept Malaysian diplomats as tenants. The ALJ further points out, “…however, to avoid issues of diplomatic immunity the building did not rent to any diplomatic mission, although it would rent to diplomats as individuals, a fact of which the respondents were aware.”
In Nasti, the ALJ points out that “pursuant to 42 U.S.C. §3604 and to the New York State Human Rights Law, Executive Law §296 (5) (a), it is unlawful for any person to discriminate in the rental of real property on the basis of national origin.” Further, under §175.25(b) of the Department of State’s Rules and Regulations, “…a violation by a real estate salesperson or broker of either of those statutes is grounds for the imposition of disciplinary sanctions up to and including license revocation.” In this case, the ALJ held that not only was the agent’s refusal to lease to the couple because they were Malaysian diplomats a violation of the law warranting revocation, but it also further held that the broker failed to supervise the agent and revoked the broker’s license as well.
In my January 2022 column (see https://bit.ly/3xkryHI), it was pointed out that the New York Court of Appeals issued a landmark decision in Roberts Real Estate, Inc. v. Department of State (80 NY2d 116, 589 NYS2d 392 (1992)). The Court of Appeals held that when a supervising broker is unaware (i.e., does not have “actual knowledge”) of the actions of a salesperson and upon finding that the salesperson has acted improperly, even where there may be a failure to supervise, the penalty to the principal broker is limited to a fine pursuant to Real Property Law § 442-c. Revocation of Mr. Nasti’s license was not supported by the record or the law. In fact, surprisingly, the ALJ stated that Mr. Nasti “…offered no evidence that would reasonably lead to the conclusion that he was unaware of Mr. Elliot’s discriminatory conduct.” As indicated previously, the burden is on the DLS to prove by substantial evidence that Mr. Nasti was aware of what transpired, it was not Mr. Nasti’s burden to prove he was not aware after he and the agent testified that he had no knowledge of what transpired. After issuance of the ALJ’s decision, the respondents filed a motion to stay same, which has been granted, and the decision is currently being appealed.
Broker’s Added Requirements: Standardized Operating Procedures Effective April 20th
In light of recent DOS Decisions, and additional legislative obligations, brokers must be very careful when operating their real estate brokerage firms. As indicated in January’s column (see https://bit.ly/3xkryHI), recent legislation requires that associate brokers who serve as office managers must now supervise other licensed salespersons and associate brokers in their office. Additionally, in order to qualify to be appointed as an office manager, the associate broker “…must have been active in the real estate industry two of the four years before beginning duties as office manager.” This new legislation now holds an associate broker, who is an office manager, to the same oversight standards of a principal broker, including the same standard and duty to supervise agents.
The standardized operating procedures, which were part of the newly enacted legislation (S.2131-A/A.618 [see https://bit.ly/3zQfDAH]) amending § 442-h of the Real Property Law by adding subdivision 4, have been issued by the Secretary of State and are set to go into effect on April 20th. The DOS provides that the following minimum prerequisites must be met and contained in the required standardized operating procedures before any services are provided to homebuyers: (i) whether prospective clients shall show identification; (ii) whether an exclusive broker agreement is required; and (iii) whether pre-approval for a mortgage loan is required (see https://on.ny.gov/3vsACb9). Initially, the legislation required that every broker file a copy of the standardized operating procedures with the DOS, however, that requirement was removed by agreement with the Governor’s office in March 2022.
The DOS requires that by April 20th “…every real estate broker, operating within the State of New York, shall have on each publicly available website and mobile device application they maintain a list of standardized operating procedures.” It also requires that “…each publicly available website and mobile device application operated by an associated agent or ‘team’ of such broker, shall have posted their broker’s standardized operating procedures or a direct link to such information on their broker’s website.” If these are not in place by April 20th, both the broker and agent(s) will be subject to discipline. Brokers should contact their IT professionals right away to ensure that they are in compliance with the new regulations.
Additionally, brokers are required to keep an archive of all standardized operating procedures “for as long as they are actively licensed” and any amendments to the operating procedures must be “date stamped and notarized.” The DOS requires that any newly adopted procedures are to be “…posted and made available, at each brokerage office and online, within 30 days of any changes.” The New York State Association of Realtors has also provided very helpful guidance (see https://bit.ly/36137Ux) regarding the new regulations and has provided a form template that brokers may utilize (see https://bit.ly/38IOvtV).
Keeping Up With the Changes
Brokers and agents should make it a habit of reviewing the decisions issued by the DOS every month as this will allow them to understand the issues that affect their industry. The DOS decisions provide critical, real-life examples of the difficulties faced by licensees every day. It is also critical that they keep up with the ever-changing regulatory landscape. As is evident, these new regulations seem to sneak up on the industry and keeping pace with the news and new legislative initiatives will make it that much easier to operate a brokerage business and implement new requirements more efficiently.
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