The Real Estate Board of New York has slapped Compass with a $250,000 fine for improperly going after its competitors’ exclusive listings.
In an email to New York City agents, the trade group said the penalty was due to “repeated violations” of REBNY’s universal co-brokerage agreement (UCBA), a document that governs how agents share listings.
All of REBNY’s residential members are bound by the UCBA, and in exchange they have access to its syndicated listing feed, known as the RLS.
According to the email, a copy of which was reviewed by The Real Deal, REBNY suspended Compass from the RLS for 10 days last year as a result of UCBA violations. But Compass appealed, prompting REBNY to convene a panel to examine its decision in November 2020.
“The panel deemed the 10-day suspension to be merited, but in consideration of other factors it imposed an alternative penalty,” said the email. In addition to the fine, REBNY is also requiring Compass’ senior managers undergo training about the UCBA and REBNY’s code of ethics.
Both REBNY and Compass declined to comment.
The fine is the culmination of a long-simmering conflict between Compass and other rivals over how Compass targets competitors’ agents and exclusive listings.
In New York, exclusive listing agreements exist between sellers and brokerage firms, not agents, even if the agent procures the client.
According to REBNY’s email, Compass has encouraged new agents to urge clients to “disavow exclusive listing contracts with prior brokers.”
As far back as 2018, the heads of several major residential firms met with REBNY’s then-president John Banks to air their grievances over Compass’ purported flouting of that rule.
Douglas Elliman chairman Howard Lorber reportedly stormed out of the meeting after a heated discussion about Compass’ tactics. “The group feels that’s unethical and improper under REBNY rules,” Lorber said at the time.
Realogy, the parent company of the Corcoran Group and Coldwell Banker, lodged a similar complaint in a 2019 lawsuit that accused Compass of “illicit” business practices.
In its complaint, Realogy cited an example of two Corcoran agents who joined Compass and subsequently posted their listings to Compass’ website without Corcoran releasing the listings. Relaogy said Compass provided new agents a template to give sellers, urging them to sign over their listings to Compass. “The form … misleads owners into thinking that they can unilaterally terminate their existing listing agreements,” the complaint said.
Compass has tried unsuccessfully to compel arbitration in the case, on the grounds that both Compass and Corcoran are bound by REBNY rules. After a judge denied its motion, Compass filed a motion to appeal the decision last month.
Notably, Compass has changed its stance on listing agreements over the years.
In 2015, the young brokerage introduced a “key-person clause” in contracts, meaning if an agent left they could take their clients and listings with them. At some point, however, Compass adopted the industry standard, whereby firms release an agent’s listings for a fee.
REBNY began imposing fines for listing-related infractions in September. There are two categories of violations, including one for bad data and one for poor business conduct. The second category covers things like agent poaching and excessive whisper listings.
For Compass, which has raised $1.5 billion from investors since 2012, $250,000 is a drop in the bucket. The Manhattan brokerage has 18,000 agents nationwide, and sold $91.4 billion worth of real estate last year. It filed confidentially to go public earlier this month.