“It was a disaster”: How a spurned RLS operator upended a REBNY meeting

Stratus Data Systems and other RLS vendors are crying foul about the trade organization’s selection process

Stratus Data System's Carlos Grass and REBNY's Jim Whelan (Credit: LinkedIn, Facebook)
Stratus Data System's Carlos Grass and REBNY's Jim Whelan (Credit: LinkedIn, Facebook)
Stratus Data System's Carlos Grass and REBNY's Jim Whelan (Credit: LinkedIn, Facebook)

Stratus Data System’s Carlos Grass and REBNY’s Jim Whelan (Credit: LinkedIn, Facebook)

Spurned MLS operator Stratus Data Systems isn’t going quietly into the night.

After losing a lucrative contract to power the Real Estate Board of New York’s residential listings service, Stratus sent a cease-and-desist letter to rival listings provider Perchwell, which was tapped last month to operate the RLS’ back-end system. Stratus also sent cease-and-desist letters to the real estate trade organization. And it did so in dramatic fashion.

In a made-for-TV moment, electronic copies of Stratus’ letter landed in the inboxes of several RLS data vendors on Wednesday, smack in the middle of a meeting convened by REBNY to discuss the transition between operating systems.

“It was a disaster,” one attendee told The Real Deal on the condition of anonymity.

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In the cease-and-desist letter, Stratus suggested that REBNY could be in violation of a licensing agreement that prohibits any third-party from using Stratus’ data and software. According to the letter, a copy of which was obtained by TRD, the fact that REBNY officials told RLS vendors that they will be able to switch seamlessly between Stratus and Perchwell suggests that Perchwell — and its new Elastic Listing System — will be piggybacking on Stratus’ proprietary software and data.

“That [Stratus Data Systems] has not been asked and has not agreed to provide data in a pre-agreed format leads us to conclude that Perchwell is attempting to take a shortcut in its development efforts by using SDS metadata, data dictionary and definitions to build the Elastic Listing System,” the letter said. “Any such use is not permitted, and it makes the Elastic Listing System a derivative work of the SDS Software.”

In a statement, REBNY said: “We are not in violation of any of the agreements we’ve made.”

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According to multiple sources, the letter was sent during a tension-filled meeting between REBNY officials and RLS vendors who are unhappy about how and why Perchwell was selected to operate the back end of the RLS.

The venture-backed startup, launched by CEO Brendan Fairbanks in 2017, has been shaking up the the listings space by poaching clients from industry stalwarts. Last month, Fairbanks called the RLS contract a big win for his firm.

But other RLS vendors have complained that the process lacked transparency because REBNY only requested information from a small group, including RealPlus, Perchwell and Marketproof — leaving out established companies such as OLR, RealtyMX and Nestio. “I certainly would have welcomed the opportunity to throw our hat into the ring,” said Nestio co-founder Caren Maio.

Others said the selection of Perchwell creates a conflict of interest, as it continues to add to its roster of brokerage clients who use its data. “One vendor shouldn’t be the one to run it,” said RealtyMX’s David Elgrabli. “There’s inherent conflict of interest, whether it’s on confidential data or just the mere sales opportunity that will be hard to pass by.”

Sources familiar with the process, however, said REBNY’s decision was driven by a desire to improve its tech. The process was approved by both the RLS Board and the Residential Brokerage Board of Directors.

In addition to bruised feelings, Stratus is still smarting the loss of a significant contract.

REBNY tax forms show that Stratus earned a $235,000 consulting fee in 2016. The company did not appear on REBNY’s tax form 990 for 2017, the most recent year available. Overall, REBNY reported $15.57 million in 2017 revenue, up from $13.99 million in 2016. Its total expenses were listed as $14.9 million, compared to $12.9 million.

A key difference in 2017 was the RLS generated $2.03 million — no doubt the result of a decision to increase dues for residential members. At the time, REBNY said it was raising dues to invest $1 million into the RLS.

By comparison, it pulled in $328,700 in 2016 and $521,139 in 2015. Among REBNY’s 2017 expenses, however, was $288,560 for “RLS-Legal.”