Montana lifts real estate rebate restrictions

A U.S. Department of Justice investigation prompted the Montana Board of Realty Regulation to lift restrictions that prohibited real estate licensees in the state from soliciting business through the offer of "gifts, rebates or promotional items."

The Montana real estate rule was targeted by the DOJ's Antitrust Division, which has taken action against similar bans on real estate rebates in other states.

"As we have consistently seen in other states, the repeal of rebate bans leads to increased competition between brokers and lower prices for consumers of real estate brokerage services," said Thomas O. Barnett, assistant attorney general in charge of the Antitrust Division, in a Tuesday statement.

Most states allow real estate brokers to rebate a portion of the commission they receive to consumers to attract business, and "Montana's rule prohibited this important form of competition between real estate brokers," according to the Justice Department announcement.

Grace Berger, executive officer for the Montana Board of Realty Regulation, said that board members voted Tuesday morning to amend language in the rule.

"The board determined it is reasonably necessary to amend this rule and delete the prohibition of business solicitation through the offering of gifts, rebates or promotional items," according to a notice issued by the board. "Following the board's August 2007 amendment of this rule, the U.S. Department of Justice advised the board that the language may be improper."

In response, the board has approved amended language to provide that payment to the principal in a real estate transaction "or reducing the commission owed by the principal is not considered payment of a commission to an unlicensed person," and is permissible.

"This proposed amendment returns the rule language to substantially the same form as existed prior to the 2007 rule amendment," according to the notice. The newly amended language has been submitted to the Montana Secretary of State's office, where it will be printed in a register and become effective the day following publication, Berger said.

The rule change last year, said Berger, was an attempt "to clarify the statute" that related to the payment of a real estate commission by a real estate licensee to a person who is not a real estate licensee. No licensees were cited for violation of the amended rule adopted last year, Berger said, adding that the board did not receive complaints from real estate consumers or licensees about the amendment restricting rebates and other offerings.

Justice Department officials had been "negotiating back and forth" with board officials, and both parties met in January to review proposed language to amend the rebate restrictions, Berger said.

A "Competition and Real Estate" Web site set up by DOJ's Antitrust Division had counted Montana among 12 states that do not allow real estate brokers to offer cash rebates to consumers. DOJ antitrust officials had earlier this year tracked anti-rebate legislation proposed in Illinois, though that bill did not advance and was opposed by the state's Realtor trade group.

DOJ officials sued the Kentucky Real Estate Commission in March 2005 to challenge that state's restrictions. Agency officials have also opposed rebate restrictions in South Dakota and West Virginia that were later rescinded, and had announced opposition to Realtor-backed anti-rebate legislation in Tennessee that was signed by the governor in June 2007.

A Justice Department official stated in a letter to the Tennessee Legislature last year that the legislation "overrides the consumer benefits" of efforts by the state's real estate commission, while the director of government affairs for the Tennessee Association of Realtors told Inman News at that time that the legislation "simply affirms Tennessee's longstanding practice of prohibiting cash rebates in real estate transactions" while continuing to allow other gifts and prizes that are not in the form of cash payments.

In addition to its opposition to real estate rebate restrictions, the Justice Department and U.S. Federal Trade Commission have also opposed state measures that mandate a specific set of services that real estate licensees must perform for consumers, at least under certain conditions. Such measures, sometimes referred to as "minimum-service" requirements, can limit price competition in the real estate industry by requiring consumers to pay for some services that they may not want or need.

Justice Department officials have also been engaged in an antitrust lawsuit against the National Association of Realtors since September 2005, charging that the trade group adopted policies for the dissemination and sharing of property listings information that are illegally restrictive. NAR has countered that its policies are not anticompetitive and the group has withdrawn some of the challenged policies. The trial is expected to begin in June or July if a settlement is not reached.

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