Didn’t Give Legal Advice, but Still Violated the Code. How?

ORLANDO, Fla. – Dear Shannon: I’m a long-time land broker and took a listing for a well-priced, 30-acre parcel of land. A potential buyer contacted me, expressed an interest, inspected the property and made a full price offer. I thought the seller would be thanking me, but the seller surprised me when they wanted to counter with a higher price. But hey, that’s what the seller wanted. So, I go back to the buyer to negotiate a higher price. Woof! The buyer was not happy and said they were going to talk to their attorney to see what legally could be done to try to force the seller to go through with the transaction at the price it was originally offered.

I’ve been around a long time, and I know how these things go, so I told the buyer in my opinion litigation would be time consuming and expensive and ultimately, they would not be able to force the seller to sell. Thankfully, the buyer agreed to the higher price, and the deal closed.

Not long afterwards, however, this buyer filed an ethics complaint against me claiming I provided bad advice! You have got to be kidding me!? I saved the buyer time and money and got a violation to show for it.  It’s the first time in my decades-long career that I’ve had a complaint filed against me, let alone a violation. I am stunned!

During the professional standards hearing at my local association, the buyer said they were going to talk to their attorney, but because of my persuasive personality and assurances that legal action would be an exercise in futility, they didn’t. Of course, I told the buyer they could consult their attorney, but I was trying to help and told them in my opinion, it would be a waste of time. It was only my opinion and not intended as a conclusive statement of the law, even though I was probably correct. I can’t believe I was found in violation of Article 13 when I was just giving my opinion as a long-time real estate broker with lots of experience. Help me out here, if I didn’t in any way practice law without a license, how was I in violation of the Code of Ethics? -Stunned

Dear Stunned: Oh wow, I hear your frustration. It can be distressful, especially when you’ve never had a complaint filed against you. One of the goals of an ethics complaint and finding of a violation is education. I’m glad you reached out. 

Let’s get directly to the question – If you were not giving legal advice, how could you still be in violation of Article 13?:

Article 13 of the Code of Ethics states: "REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it."

Article 13 expressly prohibits Realtors from engaging in activities that constitute the unauthorized practice of law. When you told the buyer that in your opinion litigation was a waste of time, you said you didn’t intend this as a conclusive statement of the law. By stating that legal action was likely going to be costly and time consuming, you may have done a good thing by providing the buyer with arguably common-sense information that the buyer should consider. The mere expression of an opinion as to the plausible outcome of the case, arguably, may not be the “unauthorized practice of law” within the meaning of the first part of Article 13. 

But take another look at the language of Article 13, focusing on the second part:

Article 13 of the Code of Ethics states: "REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it." (emphasis added)

Note that in addition to prohibiting Realtors from engaging in activities that constitute the unauthorized practice of law, it also emphasizes that Realtors have an affirmative obligation to recommend the use of legal counsel to clients and customers when their interests require it. In your case, you were aware that the buyer needed a legal opinion as to whether or not they could force the seller to go through with the transaction and somehow compel the seller to covey title to the property. As you state, you did not intend your opinion that this was a waste of time and money, to be a “statement of law” upon which the buyer could rely. 

But Article 13 obligates you to go a step further than just not engaging in the unauthorized practice of law. You must affirmatively recommend that the buyer consult their attorney to figure out what their legal rights are. Unfortunately, it sounds like you failed to make such recommendation. That’s why, even if you didn’t in any way practice law without a license, you were still in violation of the Code of Ethics.

Inspired by Case #13-3: REALTOR®’s Obligation to Recommend Counsel When Needed. Other laws and rules may apply.

Shannon Allen is an attorney and Florida Realtors Director of Local Association Services

Note: Advice deemed accurate on date of publication

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