New state advertising rules hard to enforce

The state of New York just revamped advertising rules for real estate agents, but it may not be able to effectively enforce them, industry sources said. That leaves brokers and firms with the difficult task of monitoring their agents’ email, websites and even Facebook pages.

The regulations will govern how agents can advertise online, how they handle references to brokerage firms, and even what they can call their teams. For example, a team of agents working together within a firm can no longer be called a “group.”

Approved by the State Board of Real Estate in April, the revamp goes into effect Jan. 2. The New York Department of State will be tasked with implementing the policies, which replace rules dating as far back as the 1970s.

“The existing advertising regulations … did not reflect current advertising trends, such as the development of real estate teams,” said Lazaro Benitez, a DOS spokesperson. “The new rules address contemporary forms of advertising.”

Enforcement is not going to be easy, because of both rapidly changing social media platforms such as Facebook and Twitter and the sheer number of agents and brokerages.

DOS figures show 52,855 brokers statewide, with nearly half — 23,517 — in New York City. In the five boroughs, there are 28,248 real estate salespeople, the agency said.

Many brokers told The Real Deal that they see the overhaul as a positive, especially for clients, but expect aspects of it to be difficult to police.

“The rules are good for the brokerage community and good for the city,” said Ryan Serhant, an executive vice president at the New York City brokerage Nest Seekers International. He predicted agents will have a fairly easy time following the rules for sales listings, but “rental listings will be tough to monitor.”

That’s because agents have to secure an ironclad exclusive agreement to list a property for sale; a majority of New York City rentals, however, are “open listings,” or properties marketed by many different agents.

Already, there is confusion about how the rules pertain to open listings.

The new guidelines state that agents must get “authorization for such advertisement from the owner of the property.”

But the existing rules actually require the same approval, said Anthony Gatto, director of legal services for the New York State Association of Realtors, which collaborated with the board on the new measures.

But some brokers are not aware of the law, and others said they operate under the assumption that such permission is implicit. The text of the law doesn’t specify what form the authorization must take, or whether permission needs to be given every time a new listing hits the market.

Rutenberg Realty markets only open listings that come directly from landlords or property managers, said Kathy Braddock, who co-founded the New York City brokerage. But she and other firm heads said they are under the impression that once a firm has worked with a property manager, permission to market their open listings is assumed going forward.

Not so, according to Gatto of NYSAR. “With open listings, there’s no implied authorization,” he said. “A broker cannot assume because he obtained permission to market a listing in a building at one time that he has permission to market another unit in the building.”

Police force

To police the real estate industry, DOS said it relies primarily on complaints from consumers, which it then investigates. The agency said it also initiates its own investigations, such as randomly reviewing websites.

Records from the DOS Division of Licensing show 952 real estate complaints filed in 2012. More than half — 506, including some involving advertising — were claims of “untrustworthiness.” DOS can impose fines of up to $1,000 per violation.

The DOS is “more of a reactive agency because it would be cost-prohibitive” to monitor all the state’s brokerages, said Gatto of NYSAR. “They’re not out there aggressively as a policing force looking for these violations.”

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Attorney Neil Garfinkel, residential counsel to the Real Estate Board of New York, agreed that the “bulk of the enforcement” is reactive.

Benitez, the DOS spokesperson, disagreed with that characterization, describing the agency’s efforts as “not necessarily a response-to-complaints effort.”

Other industry insiders said brokers effectively act as the agency’s eyes and ears, and many don’t hesitate to report violations by competitors.

“Many brokers feel that some of their fellow brokers would be all too anxious to report a violation,” said real estate attorney Andrew Herz, a partner at Manhattan law firm Patterson Belknap Webb & Tyler.

Teaching to the test

With the DOS likely unable to prevent rule-breakers, much of the sometimes-tricky responsibility for enforcement will fall to brokerage firms.

At City Connections Realty, founder and CEO David Schlamm said he’ll be doing “spot checks” of his agents’ Facebook and Twitter accounts, with help from with the company’s social media coach.

Rutenberg is hiring one or two employees at an hourly rate to check every Rutenberg web and social media page, Braddock said, as well as every agent’s business cards and other marketing materials.

Firm heads also told TRD that they will install filters on their websites to prevent noncompliant postings.

Bond New York already has filters in place on its website to make sure listings don’t inadvertently break Fair Housing laws, said Douglas Wagner, the company’s executive director of leasing. To comply with the new law, he said, the firm has implemented an electronic feed that pushes listings from an internal database on to the firm’s website, allowing better oversight of the content.

Such measures can be costly, but Wagner said Bond chalks them up to the cost of doing business. “The benefits of making such an investment far outweigh the short-term costs involved,” he said, noting that consumers feel more comfortable with agents if they know they’re following the rules.

“For real estate agents, offering such clarity and transparency [helps] overcome any level of suspicion or distrust from the consumer,” he said. “It more formally establishes the agent in their professional context.”

And he was clear about what would happen to agents who don’t follow the rules: They’ll be shown the door.

“Rogue agents will be disassociated,” he said.

Warburg Realty already moderates agents’ websites and blog posts, president Frederick Peters said. He added that Warburg has “detailed guidelines in place” for social media, and teaches courses on the subject.

For many firms, compliance efforts involve training and education, brokerage heads said.

The sales and rental brokerage Citi Habitats plans “to roll out in-office training on the new guidelines at each of our branch offices,” said firm president Gary Malin. “In addition, we will add a class on the new rules to our new agent training, which all new hires must complete.”

While the rule change “may be a temporary inconvenience,” he added, “in the end it will increase transparency in our industry, and that’s a good thing.”