VALERIE BAYHAM
Case about consumer choice
A Massachusetts-based Web site that advertises for-sale-by-owner homes has won the first round in a free-speech battle against the New Hampshire Real Estate Commission.
A U.S. District Court judge refused to dismiss a lawsuit filed by ZeroBrokerFees.com against the commission and state attorney general challenging a state regulation requiring any entity that distributes information about for-sale properties to be a licensed real estate broker. Lawyers representing the Web site argue that the regulation violates First Amendment freedom-of-speech rights.
In a ruling earlier this month, U.S. Magistrate Judge James R. Muirhead of the U.S. District Court in Concord, N.H., agreed that the lawsuit raises free-speech issues that should be resolved in court.
“It’s a tremendous victory for us,” said Ed Williams, chief executive officer of Beverly-based ZeroBrokerFees.com, which advertises thousands of properties for sale throughout the country. “I’m happy with the court for a thoroughly logical and reasonable rejection of what always seemed to me a fairly specific argument for dismissal.”
A key issue in the case is whether a section of the state’s Real Estate Practice Act that sets penalties for anyone who publishes information about properties for sale in New Hampshire without a real estate license is unconstitutional.
The Real Estate Commission and the attorney general’s office sought to dismiss the case, claiming that ZeroBrokerFees.com could have filed a petition for declaratory ruling with the commission to determine whether the act applied to the Web site before they filed a lawsuit.
The commission has not taken any action against ZeroBrokerFees.com, which charges home sellers a flat fee to advertise their properties but does not become involved in any property sales or collect a commission from the sale of advertised properties.
The ruling, issued March 14, caught the attention of industry watchers.
“I don’t believe any company that wants to advertise homes for sale on the Internet should be required to get a real estate license,” Albert Hepp, president of the American Real Estate Broker Alliance, a group that represents flat-fee brokers, said in an e-mail.
“In my experience, when you examine the motivation of people who want to require licensure, it appears that they are motivated to limit competition, not to protect consumers. AREBA strongly believes that innovators should innovate, consumers should choose and established real estate brokers should compete,” he said.
Even though the commission has not officially challenged ZeroBrokerFees.com or issued any penalties against the site, Williams argued that the regulation “chilled” his free-speech rights. He said he did not aggressively promote the site in the Granite State because of the regulation. Last week, the site featured 794 home listings from Massachusetts and only 87 from New Hampshire.
Williams also feared that the commission would come after his Web site, which he and partner Frank Mackay-Smith launched in April 2005, and potentially “bankrupt” his small business. Listing any property without a broker’s license is punishable by a fine of up to $2,000 per listing.
Reason to Worry
Williams says he had reason to worry. At one time, he was embroiled in a dispute with the New Hampshire Association of Realtors and the commission over ISoldMyHouse.com, a Web site that Williams created and started.
The Realtor group filed a complaint with the commission in 2004 claiming that ISoldMyHouse.com, which helps New England homeowners sell their properties without a real estate agent, was acting like an unlicensed broker because it offers advice, charges fees and connects sellers with buyers.
The association claimed that the site violated the Real Estate Practice Act. ISoldMyHouse.com was owned and operated by Peabody-based East/West Mortgage Co. before it was sold to Sterling Lion LLC two years ago. A court eventually removed Williams, who left ISoldMyHouse.com in January 2005 after the sale, from the complaint.
But with the case still unresolved, Williams felt his new business was in jeopardy. So last June, ZerobrokerFees.com, with the help of Institute for Justice, a libertarian public-interest law firm based in Arlington, Va., filed a federal lawsuit challenging the licensing requirements of New Hampshire’s real estate regulation.
“I decided to be a plaintiff this time rather than a defendant,” Williams said.
The attorney general and commission asked the court to withhold any judgment until the pending action against ISoldMyHouse.com was resolved.
Judge Muirhead noted in his ruling that he had to proceed even though there were similarities between the two cases.
“Defendants have identified one matter pending before the [Real Estate Commission] concerning issues similar to those raised here. And while defendants assert that judicial review is available in the [ISoldMyHouse.com] matter in the state courts, they have not demonstrated how review of that matter would resolve the plaintiff’s constitutional question,” Muirhead wrote. “Defendants also have not identified any other matter currently pending before any state court that might, upon state court resolution, obviate the need for a federal court decision in this matter.”
The lawsuit is moving forward to the evidence-gathering stage, according to James Kennedy, assistant attorney general in New Hampshire. “We’re not appealing the motion to dismiss at this juncture,” Kennedy said.
Valerie Bayham, a staff attorney with the Institute for Justice, said the case is about consumer choice and allowing homeowners to decide how to best advertise and sell their homes.
“The Internet has revolutionized homebuying and selling and it’s allowing consumers to save thousands of dollars because the information is at their fingertips rather than only coming through a broker,” she said.
“We think the free flow of information shouldn’t be restricted to real estate agents,” she added.
The Institute for Justice successfully challenged a California law similar to New Hampshire’s regulation in 2004. In that case, a federal ruling struck down the California law.
Pat Rioux, who operates ListforLess.com in Marlborough – a company that charges home sellers a flat fee to list their properties on a multiple listing service – said homeowners should not be restricted in their options to sell their home.
“If they need brokerage assistance that means full-service traditional real estate brokerage to flat-fee limited service and anything in between. If they wish to go it alone, they should be able to advertise in newspapers and other print media and, most importantly, the Web, where over 80 percent of homebuyers start their searches these days,” she said in an e-mail. “Companies that promote homes for sale on the Web are simply providing advertising services and should not be required to obtain a real estate license if they are not practicing brokerage, in my opinion.”
Bayham pointed out that the New Hampshire Real Estate Commission was established to protect consumers – not Realtors. “Rather than shutting down competition for Realtors,” the commission needs to “catch up with technology,” she added.
And agencies must ensure they don’t discriminate against some forms of speech when they’re crafting laws, she said.
“Our First Amendment guarantees that Americans can speak their minds and disseminate information without approval from government censors. Allowing licensing commission officials to make the distinction between speech cannot be permitted if speech is truly to be free,” she said.
