Whose Rule is it Anyway?

Sometimes it can be helpful to take things back to the beginning and review the basics. A lot of questions we receive on PAR’s Legal Hotline involve people asking if someone is doing something “illegal.” And our answer is often, “Well, not exactly.” Even if what they are doing is wrong, it is not necessarily illegal. This is why it is extremely important to understand what rules are where and what the implications and consequences can be for violating those rules.

There are a couple of categories that are applicable to specific groups of people. There are regulations and laws specific to Pennsylvania licensees, and then there is the Code of Ethics which is applicable to Realtors®. MLS policies are policies that apply to licensees who use that MLS and then there are also broker policies which can be more in-depth and only applicable to the licensees at that brokerage.

The first Pennsylvania-specific act is the Real Estate Licensing and Registration Act. RELRA is the state act that covers real estate brokers and licensees.

The second Pennsylvania-specific regulations are the State Real Estate Commission Regulations (also known as regs). The regs govern real estate activity for the state.

The enforcing body of RELRA and the regs is the State Real Estate Commission.

The Realtor®-specific rules are the Code of Ethics. The Code of Ethics consists of two parts, the articles and the standards of practice. The standards of practice coincide with specific articles and go further to interpret what is covered by that article. The enforcement body for the Code of Ethics would be the ethics procedure through a Realtors® association.

MLS policy is specific to users of that MLS. There are some overarching MLS policy statements that come into play, but there are also areas that are MLS-specific. The enforcement body would be the MLS.

In addition to all the applicable rules above, brokerages will also have their own policies. These policies cannot be less than the required by the above sections, but they may have more coverage. This allows the broker to have the agency run in a way that they prefer. There may also be brokerage policies from a larger level, if the brokerage is a part of a larger organization.

Here are some examples to show how one question might have a few different avenues to take to get to the complete answer. This can be why it is extremely important to know the rules and which ones are applicable at any given time.

Question: How long do I have to keep my files?

Applicable Rules: Regs and Broker Policy

Answer: Section 35.286 of the regs state that files shall be retained for at least three years following consummation, absent a few exceptions when the transaction has not been consummated. However, brokers are always recommended to talk to their attorney and their accountant to get a recommendation from them. In some cases, their attorney or accountant might suggest a longer time and they add that to the broker policy.

Question: What do I need to disclose when I am buying or selling my own house?

Applicable Rules: Regs and Code of Ethics

Answer: Section 35.283 of the regs states that a licensee must disclose their interest in writing to all parties concerned prior to participating in a real estate transaction involving property in which they have a current ownership. This would apply to transactions where the licensee is selling or leasing properties. But Article 4 of the Code of Ethics covers both buying and selling. Aside from revealing their ownership or interest when selling or leasing, Realtors® must disclose their status as a Realtor® when buying and/or presenting offers for themselves or any member of their immediate families, their firms or any member thereof or any entities that they have an ownership interest (such as an LLC). A Pennsylvania Realtor® must follow both, so they would need to disclose in writing whether they were buying or selling their own property.

Knowing which rules are applicable in various circumstances not only allows you to actually follow the rules, but it also shows other licensees that you understand and follow the rules. It also allows you to understand what steps to take in the event another licensee in the market is not following a certain rules.