NAR lockbox policies in focus

During the Council of MLS members-only webinar on Thursday, November 1, I briefly discussed one issue that will be before NAR’s Multiple Listing Issues and Policies Committee (MLIPC) in Orlando next week. I’ll recap that issue here. But during the conversation, a related issue came up, and I’m afraid that I may have caused more confusion than clarity on that, so I’ll attempt to clear it up here.

Current policy issue: Can brokers be forced to pay for lockboxes?

First, the issue before the MLIPC next week: Back in April, a Michigan MLS asked NAR to reclassify lockbox services under NAR’s statement of multiple listing policy 7.57. That policy divides all services provided by MLSs into three categories:

• Core: These are the services you must provide just to be counted an MLS under NAR policies, namely, providing access to active listings and being a facility for broker to make and accept offers of compensation. (Note that some MLSs not affiliated with NAR do not require offers of compensation—but if you are not an NAR-affiliated MLS, why are you bothering to read this post?)
• Basic: These are services that are central, but not essential, for provision of MLS. MLSs that offer them can make their cost part of the basic fees for MLS; in other words, MLSs can make all participating brokers pay for these services whether they want to or not. Examples include off-market listing information, tax records, mapping services, and statistical information, among others.
• Optional: These are services that MLSs cannot require brokers to use or pay for. The only listed optional services are “lock box equipment,” including keycards and lockboxes, and advertising (like an MLS magazine or listing syndication).

The MLS making the request wants to do what many others have wanted to do over the years: make the lockbox service/system a non-optional service. The requesting MLS, and a couple others who chimed in over the summer, cite the following reasons for wanting to make lockboxes part of the basic MLS package:

• It standardizes access to properties listed in MLS, facilitating showings and sales.
• Use of the electronic lockbox systems results in a higher level of security for homesellers.
• It permits easier tracking of unauthorized granting of access; for example, some brokers have given combo box combinations directly to their clients and let them go and show themselves the properties of sellers.
• It helps to address problems where listing brokers are not making properties accessible.

The MLS Technology and Emerging Issues Subcommittee (TEIS) of the MLIPC (this is the same group that came up with the social media policy proposal I discussed a week or two ago [link]) considered this issue and has recommended that the policy NOT be changed. Their rationales:

• Not many MLSs have asked for this.
• Most brokers use lockboxes if their MLSs make them available optionally, so why is it necessary to require them?
• The proposal makes “no provision to limited possible abuse of the requested authority.” (Candidly, I have no idea what the subcommittee meant by this… if an MLS wants to abuse its authority, there are myriad ways to do so. The current policy is hardly a meaningful restraint.)
• The proposal does not account for the fact that lockboxes are sometimes provided as a service of the REALTOR® Association rather than the MLS.
• There are potential antitrust concerns of trying to tie the purchase of lockbox services to the purchase of other MLS services.

I’m not interested in evaluating the claims or rationales of either side here, as I have not thought them through yet. The key for MLSs to understand: If you want this change from “optional” to “basic” for the classification of lockbox services, you had better either immediately send a letter to NAR emphasizing that or show up at the MLIPC meeting (9:00 a.m. Eastern, Saturday, November 10 in Orlando) to let NAR know that this matters to your organization and you want further consideration of it.

Policy issue from May: Can brokers be required to use lockboxes?

OK, so far so good. Here’s where I got on thin ice on Thursday. Back at Midyear meetings in May in Washington, the MLIPC considered a different proposal to modify the lockbox policy. There was a proposal from the California Association of REALTORS® to allow MLSs to require the use of MLS-approved lockboxes in certain circumstances. NAR eventually adopted the following policy language in statement of policy:

MLSs may, as a matter of local option, require placement of an MLS approved lock box on listed properties if any device giving access to real estate professionals and/or service providers is authorized by the seller and occupant and is placed on the property. The purpose of this requirement, if adopted by an MLS, is to ensure cooperating participants and subscribers have timely access to listed properties. Requiring that a lock box or other access device be “MLS-approved” does not limit the devices that satisfy the requirement to lock boxes leased or sold by an association or MLS. The MLS may require that the devices be submitted in advance for approval, and the access device may be any lock box or other access device that provides reasonable, timely access to listed property. The MLS also may revoke the approval and/or subject the participant to discipline if the device is used in a manner that fails to continue to satisfy this requirement.

The gist of this:

• MLS cannot force broker or seller to put a lockbox on the property at all. Broker and seller can say, “no lockboxes, period.”
• MLS cannot force broker or seller to use a lockbox from the MLS’s or association’s system.
• MLS can (but need not) have a rule that says, if there’s a lockbox or any other kind of access device (like a digital doorknob) on the listing, the listing broker must do one of two things. Either (1) use the MLS or association lockbox system, or (2) use a device or system, in combination with listing broker operational procedures, that meets the reasonable and timely access standard adopted by the MLS.

I spoke about this issue at length with Elizabeth Miller-Bougdanos, who is senior legal counsel at the California Association of REALTORS® and has given this issue more thought than probably any other lawyer on the planet. CAR has adopted a model rule, which NAR has approved, that defines the “reasonable and timely access standard” this way:

(1) it allows all participants and subscribers timely access to listed property by reliance solely on data submitted to and residing on the MLS; (2) complete, accurate and stand-alone instructions are provided for accessing the listed property in the appropriate agent section on the Service; and (3) it ensures that the lockbox or device will provide reasonable access to listed property with any information, code or key needed to access the contents of the lockbox or device to be made available or access to the property otherwise scheduled within four [4] hours of initial contact in the event the lockbox or device requires the participating member to obtain additional information to enable access (ex: “call listing agent for entry code”) with said 4 hour response obligation in effect every day from 8am to 6pm.

(If you want more of the materials that CAR has prepared, contact Elizabeth if you have her address, or contact me and I’ll provide it.) At first blush, this seems quite reasonable to me, though I have not given it the detailed analysis it deserves. I also have lots of questions about hypothetical situations that I discussed briefly with Elizabeth, but this post is already too long to discuss those.

Conclusion/summary

In sum, then, here are three rules that every NAR-affiliated MLS is bound to under the current policy (and this is not likely to change next week, given the TEIS’s recommendation):

• MLS cannot make brokers pay for lockbox systems as part of MLS’s basic fee structure. (There is some nuance to this part of the policy. Call me if you want to discuss.)
• MLS cannot require a lockbox of any kind to be used on a listing just because the listing is in MLS.
• If the listing broker and seller decide to use a lockbox, MLS cannot require it to be one from the MLS’s (or REALTOR® association’s) system. But MLS can adopt a “reasonable and timely access standard” with regard to means of access other than those provided by the MLS or association.

Comments?
-Brian