Janik: Buyer Agency, Property Disclosure Biggest Milestones in 36-year Career
Janik: Buyer Agency, Property Disclosure Biggest Milestones in 36-year Career
Long-time NAR General Counsel Laurie Janik will retire from the association at the end of November. Janik joined the association in 1977 as a summer law clerk and was named general counsel in 1987. During her tenure, NAR has faced significant legal challenges, including an antitrust lawsuit in 2005 by the U.S. Department of Justice challenging NAR’s policy on the display of listings on the Internet. Janik sat down with REALTOR® Magazine’s Robert Freedman in October to get her thoughts on the biggest issues the association has faced and what lies ahead. A national search for Janik’s successor is underway.
What’s been NAR’s most important accomplishment during your tenure?
The shift, starting in about 1985, from cooperating brokers working as subagents of the listing brokers to representing buyers. That realignment of roles more accurately reflects reality because it’s consistent with agent behavior and, most importantly, it gives buyers representation, which they lacked before. Now, most buyers in a real estate transaction have an agent who represents them, and the listing broker represents the seller, and that’s a much healthier marketplace. But accomplishing the change wasn’t like flipping a switch. It took place over many years, about 10 years. States had to modify their laws and NAR modified its Code of Ethics and MLS rules to address buyer representation, and NAR acquired the Real Estate Buyer’s Agent Council (REBAC) and started offering education and the Accredited Buyer’s Representatives (ABR) designation.
Also significant was the advent of seller property condition disclosure forms, which happened around 1990. We took a look at where brokers were incurring the greatest number of lawsuits—perhaps not the highest dollar volume judgments, but the greatest number—and we implemented what is a very positive risk reduction tool for brokers to curb that liability: make the seller fill out a form that tells the buyer what the seller knows about the property. Everyone knows they’re not buying a perfect property, especially if it’s a resale. Buyers just don’t want surprises. Again, it took many years for this change to permeate the marketplace but it has been enormously beneficial for our members. Originally, we thought about addressing these disclosures through the Code of Ethics, but if a seller doesn’t want to make these disclosures, we’re putting our members at a disadvantage, because they’ll have an ethical duty to be making disclosures while someone down the street won’t. So we decided to lobby to have it adopted as state law, so then we had to go state by state, and there was resistance in some markets. That’s because if sellers were in a state where it was caveat emptor, buyer-beware, you were all of a sudden imposing a duty on a seller that just didn’t exist before. Some jurisdictions adopted it right away, but it was difficult in some jurisdictions. It’s pretty much in all states now, although some states give sellers the right to either disclose or disclaim, which in effect lets sellers say they’re not filling out the form, leaving buyers to take their chances.
For you personally, what was your biggest legal challenge on behalf of NAR?
The antitrust lawsuit, only because we were up against the United States Department of Justice. That’s a pretty big challenge, when an agency of that magnitude disagrees with you on a legal matter, and it went on for quite some time. (The 2008 settlement was reached three years after the lawsuit was filed. The lawsuit concerned a policy allowing brokers to opt out of having their listings appear on virtual office websites, or VOWs, which are online brokerages requiring consumers to register to see listings. Under the settlement, brokers can’t opt out of MLS feeds going to specific brokerages but brokerages displaying listings must make an effort to generate listings on their own and sellers are protected from having their listings on the Internet if they don’t want them online, and they can also require false information to be removed.
Another challenge that kept me up at night was a petition to cancel the registrations for the terms REALTOR® and REALTORS® that was filed in the early 2000s with the U.S. Patent and Trademark Office. We had contacted a gentleman who was selling domain names that included the term REALTOR®, like Virginiarealtor.com and Washingtonrealtor.com, and said, “You can’t do this.” But this was his business model. He was also selling websites and other things. In response to that, he filed these cancellation petitions asking the Trademark office to take away the registrations for our marks, because, he claimed, the terms had fallen into a generic use. We took that challenge very seriously, because it would have been a huge loss to the organization; we were protecting the multi-billion-dollar brand of the organization. In the end, we prevailed: the terms were found not to be generic. Most people were saying we wouldn’t win, but we proved them wrong. They were claiming the relevant market was the broad universe of people who were using real estate services. We said, “No, we’re an association; we sell association services. We sell membership in our association, and the relevant market is the people who would be buying our services.” In fact, this gentleman was selling to the exact same market, our members. When we surveyed people who had held a real estate license for more than a year, 86 or 87 percent recognized that REALTOR® is a trademark that means a member of the National Association of REALTORS®. The Trademark Trial and Appeal Board gave our survey great credence, and it showed that the marks still had trademark meaning in the relevant market. It was a beautiful decision about the strength of the mark. They found that we had a strong and protectable mark and that we did a good job protecting it.
For real estate, what has been the most significant legal case or decision, whether federal or state, during your tenure?
There isn’t one case I would say is huge. There were probably a dozen cases. Obviously cases that go to the U.S. Supreme Court are important. Last year’s 9-0 Supreme Court decision in the Freeman case interpreting the Real Estate Settlement Procedures Act (RESPA) was very significant, and I took pleasure in the decision because ten years before I had been telling HUD exactly what the Supreme Court said. (Under Freeman vs. Quicken Loans, the court ruled that the prohibition in RESPA of unearned fees referred to fees that are split with another service provider for which no service is provided—a kickback. The law does not apply to fees charged by a single entity. Another big one was Holley vs. Meyer, which held that a broker could be held liable for the discriminatory conduct of the broker’s agents.
How do you describe the value that NAR brings to its members?
NAR’s greatest value is its ability to help shape an environment in which its members’ businesses can prosper. Whether it’s in the legal environment or the legislative or regulatory environment, and whether its education, the association wants to help shape a healthy environment so that its members can go out, compete in their marketplace, and prosper. That is the role of NAR.
Looking ahead, what’s the biggest challenge NAR faces?
Ensure the availability of mortgage capital. That is critical to keep the market moving. It’s a great uncertainty right now. We’re looking at tightening mortgage standards, with the qualified mortgage (QM) rule, but even from a bigger perspective, if you take a step back, the flow of capital into the mortgage market, residential and commercial, is going to be critical. The federal government is working on rebuilding the secondary mortgage market. They’re trying to decide what to do with Fannie Mae and Freddie Mac, the two secondary mortgage market companies, and that’s one of NAR’s most important roles in the future: ensuring reform doesn’t hurt the flow of capital.