The Phoenix Association of REALTORS® (PAR) is currently embroiled in a public, bitter dispute with the National Association of REALTORS® (NAR) over a PAR alternative MLS membership option launched this year, underscoring deeper divisions and dissatisfaction with MLS access and REALTOR® membership requirements.
The imbroglio began several weeks ago when NAR took exception to PAR’s plan to offer its members “MLS Choice,” which would allow agents and brokers to access listing services without REALTOR® membership. NAR then told PAR to cease and desist from offering MLS Choice, which appears to circumvent NAR’s commitment to the “three way agreement”—the long-held and recently reaffirmed requirement that members join local and state boards along with NAR, paying separate dues to all three.
The fact that NAR is publicly threatening legal action against a local association, with no indications of an imminent resolution is telling. As a handful of brokers across the country have sued NAR over MLS access restrictions, this fiery clash in the Arizona desert shows just how hotly contested the issue is, and how far NAR will go to defend the current system.
PAR, which boasts around 11,000 members, does not appear ready to back down either. In a strongly worded email to RISMedia Jan. 2, PAR CEO Andy Fegley expressed confidence that if the matter must be settled in court, PAR will win.
“PAR has and will continue to reach out to NAR in an effort to resolve this dispute amicably and in a way that best serves our shared members and the needs of the real estate industry,” he wrote. “PAR believes, and history has shown, that litigation should always be the last resort. But, because NAR threatened PAR with a lawsuit as well as charter revocation, we will be prepared for that possibility. Our continuing investigation supports our belief that PAR will prevail if NAR files suit.”
Why is the question of MLS access for non-members creating such a bitter, public battle? As NAR officially allows local boards to make their own decisions on who can access the MLS, and most (but not all) state governments and courts affirming that REALTORS® can determine who is allowed to access the MLS, what has changed to spark this growing controversy?
Wayne Bell is a former commissioner of the California Department of Real Estate, a licensed broker and a lawyer. While also careful to note he has never been a REALTOR® and is not directly involved in the Phoenix dispute, he says he understands why NAR is fighting the new PAR membership option.
“You’ve heard the term ‘death by a thousand cuts’? I think NAR is concerned that this would severely diminish their membership rolls,” Bell says. “If Arizona were able to do this, and then let’s say a state like California did it, and then Illinois or Texas, (people) say, ‘Well, we don’t need to be members of the REALTORS® Association.’”
Bell adds that he fully supports NAR’s stated goal of protecting the integrity of the MLS system, and ensuring access to accurate listings while maintaining high professional standards for those in the real estate practice.
“However, if you are someone who doubts what people say, you might say, ‘Well, this is more self-interest than it is consumer protection interest.’ And I could make an argument on both sides,” he says.
Opening salvos
What happens in Arizona could be determinative for how the simmering fight over MLS control plays out across the country. One of the first questions will be what NAR will—or can—do to punish PAR, assuming they cannot reach a compromise, which Fegley says is not forthcoming.
“NAR, as recently as today (Jan. 2), communicated that it will only talk if PAR surrenders to NAR’s demands first—that’s not compromise,” Fegley stated in his email to RISMedia. “To be clear, we will continue to seek a reasonable resolution that does not eliminate the right of REALTOR® associations to vend services to non-members. We seek to evolve with the changing needs of the real estate industry, not move backward and further restrict the services an association can provide the brokerage community. We hope NAR will support such efforts.”
In a letter to NAR December 23, lawyers for PAR said the organization will not accede to NAR’s demand to withdraw its new membership option. In response, according to a PAR spokesperson who emailed RISMedia, “NAR notified Phoenix REALTORS® of its intent to move forward with the charter revocation process that (same) evening.”
What exactly does a charter revocation look like, and how would a judge view the dispute? NAR has chosen not to answer questions other than to issue a statement that read:
“Under their charters from NAR, state and local associations are prohibited from adopting any practice inconsistent with NAR’s bylaws and Constitution. Phoenix REALTORS® is violating NAR’s bylaws and Constitution by offering a non-REALTOR® membership option. NAR has no choice but to take action to defend the REALTOR® trademark, our integrated model, and the members and consumers they serve. Without action, we put the benefits NAR members rely on—such as market research, business resources, a unified advocacy platform, and a single Code of Ethics—and the organization itself at risk.
“NAR has begun the process—as outlined in our bylaws—to revoke Phoenix REALTORS®’ charter. As a next step, Phoenix REALTORS® will have an opportunity to meet and discuss with a panel of NAR’s Executive Committee. Should the local association continue to violate NAR policy, a hearing before a larger panel of our Executive Committee will be scheduled.”
While the exact consequences of losing a charter as a REALTORS® association does not appear to be set in stone, there is some precedent. Back in 2015, NAR revoked the charters of 16 local associations who failed to comply with the then-newly adopted “core standards” requiring local boards to commit to certain levels of advocacy, consumer outreach and services for members.
It was not clear if NAR had ever revoked the charter of a local board under circumstances like this one—in a dispute over a local decision or program. According to NAR’s most recent manual on the Code of Ethics and Arbitration, the process could take months and with appeals, would likely stretch until next May, when a final decision on charter revocation would be rendered at NAR’s semi-annual meeting.
At that point, the “jurisdiction” of the local board “shall revert to the status of territory unassigned by the National Association,” according to the manual.
What would happen to the entity formerly known as PAR at that point? That is also not clear, although an NAR FAQ specifically addressing charter revocation due to “core standards” violations said there are several possible scenarios.
“Revocation of an association’s charter doesn’t automatically result in the corporation being dissolved,” the document read. “The future of the corporation will be determined pursuant to the provisions of the articles of incorporation and the association’s bylaws. The decision may be to wind up the affairs of the corporation and dissolve or, alternatively, to continue to function as a real estate association, though not as a member of NAR.”
If dissolved, assets belonging to the local association “would be paid out pursuant to the relevant bylaw provision,” which usually means transfer to the state association or another non-profit.
RISMedia posed several questions to PAR regarding what charter revocation would mean. While not answering directly, Fegley shared his opinion of what may lie ahead.
“Several of your questions focus on policies and procedures that NAR created and controls,” he wrote. “We, too, are working on answers to some of those questions, such as the direct impact a charter revocation would have on PAR, our members, and the broader real estate community.
“NAR cited one procedure in their demand letters, but we’re also aware of a more detailed procedure that includes more information and specifically notes that ‘[t]his Policy Violation Resolution Procedure, below, will also be followed where NAR has identified noncompliance by an association but has been unable to resolve the matter and achieve compliance.’”
And how would a court battle play out? Bell says that is unclear, but that NAR has several possible and viable claims to make based on the specific circumstances.
“I don’t know what a court is going to do. A court may say, ‘You know what? This is a squabble inside of a trade association and we don’t care.’ Because it’s not state law. It’s sort of like children fighting against their dad.”
The narrow road
A lot has changed in the industry over the last year, and the controversy in Arizona appears to be at least tangentially related to the other broad policy changes and upheaval due to larger legal fights. Bell says he has observed a greater appetite for questioning the current system, at least around the MLS.
One of the lawsuits filed by brokers specifically cited the NAR settlement as diminishing the value of REALTOR® membership and the MLS generally (an assertion NAR has also pushed back against). Bell says in his role he has generally seen REALTORS® struggle to articulate the value of a REALTOR® compared to a licensed broker or agent, and believes that the recent policy changes had made that distinction “funkier.”
“REALTORS® can’t share information about commissions. So if you’re not a REALTOR®, can you do it?” he asks. “I am not a REALTOR®, but I’m a broker, so I can do a whole bunch of stuff that REALTORS® are prohibited from doing.”
Whether or not the controversy over MLS access spreads nationally, or whether it plays out in the courts or in the court of public opinion is unclear. Bell says he thinks NAR is hoping to set a strong precedent in Phoenix.
“If a court, let’s say a court said, we’re going to enjoin you in Arizona from doing what you’re doing, then that sends a big message,” he says. “(NAR) would like to get some kind of a positive court result to stem the defections. But if they don’t get that, I think it’s going to play out in both (courts and public opinion) because you’re going to see real estate licensees file lawsuits, and they’re going to say, ‘You’re forcing me to be a REALTOR®. I don’t want to be, and all I want is access to MLS.’”
Is there another path to compromise, or to altering the MLS system and the “three-way agreement?” Bell mentions the possibility of having state laws passed, but notes the significant lobbying power of NAR and REALTORS® across the country, which would likely be used to ensure MLS access is still mostly restricted to members. NAR and likely many state associations are happy with the system as it is now, he says, and will fight to protect it.
Fegley, for his part, does not characterize the current fight in such broad terms, focusing instead on the relatively small step—which is also not unprecedented—of allowing non-REALTORS® to access the MLS under a specific and separate program.
“Ultimately, we believe this dispute raises but a single question: may REALTOR® associations vend services to non-members? We know that they may. Many associations do now. Again, we’ve shared with NAR several times that we’re willing to compromise on how such services are described, and make even clearer that those services do not include REALTOR® membership. Unfortunately, PAR’s overtures have not been met with the same openness to amicable resolution.”
