Update on the CIVIX issue

Like many folks in the industry, we’ve spent the first couple days of this week looking over the final documents that embody the deal NAR struck with CIVIX last week. The final documents had terms that were different than what we heard in Washington DC. We are still cautiously optimistic that this may be a good deal for MLSs, brokers, and their business partners, but it is possible that the MLS vendors will not see it that way.

Here are the major differences between what we heard in Washington, which we reported on previously, and what the final documents say:

1. The amount due: For an MLS to have any coverage under the settlement/license, it must pay the whole amount due under the license arrangement. At the NAR midyear meetings in Washington, NAR told us that an MLS would be able to buy a license for its market at a lower license fee if the MLS’s vendor refused to participate in the settlement with CIVIX. The point of a lower license fee option was that an MLS with a strong indemnification clause in its vendor contract could settle with CIVIX for everything but that contract; if CIVIX sued the MLS over that contract, MLS would call on the MLS vendor for defense. The final resolution does not include this option.
2. The 90-day timeline: The timeline works a little differently than we were previously led to believe. NAR must collect $2.5 million by June 16 in order for any MLS to receive a license. If it meets that target, every MLS that paid in the first 30 days will receive a license; if it falls short, none of those MLSs will get a license, and NAR will return their money to them. Then, between June 16 and July 16, NAR must collect additional funds to bring the total to $5 million. If NAR meets that target, every MLS that contributed up to July 16 will receive a license; if it falls short, none of the MLSs contributing between June 16 and July 16 will receive a license, and NAR will return their money to them. The same process holds for the final 30 days. This makes it all the more important that if your MLS is considering accepting the proposed resolution, it should do so in the first 30 days.
3. The end-game: In Washington, NAR said that it would grant a blanket license to the whole industry if it reached the $7.5 million mark in 90 days. Now, NAR is suggesting that MLSs seeking a license for the CIVIX technologies after the 90 days would still have to pay NAR. If NAR collects additional money for licenses over the $7.5 million, it would pay the overage back to MLSs on a pro rata basis (depending on how much they paid in). This will likely be viewed as giving incentive to MLSs (even very small ones) to pay up during the first 90 days.
4. Vendor support: NAR has not recommended a level of vendor support in the final documents. Previously, NAR suggested that MLS vendors would be expected to chip in 60-80% of the cost of the settlement/license. The final documents do not propose any division of the costs. This question will apparently be left to negotiations between MLSs and vendors. This makes it all the more important to learn what your vendor is planning to do.

Vendor strategies are appearing to diverge some as of this week. One large vendor tells us that it will support the settlement financially but is still working out details. Another has told its customers that it will not support the settlement, at least in its current form. A third large vendor appears to be on the fence. One small vendor has already informed its clients that it intends to pay half the $9.06 if its MLS customers do. Each of the companies may have a strategy motivated by its unique circumstances. Our sincere hope is that they will make their strategies known in the next few days so that our MLS clients can make their decisions with relatively complete information.

As we said before, you should be discussing this at your MLS now or very soon.

-Brian