A proposed settlement agreement has been reached with respect to a class-action lawsuit that was filed in the Missouri federal court by a group of home sellers against the National Association of Realtors (NAR) and other defendants. The Plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates.

Pursuant to the settlement NAR agreed to pay $418 Million over approximately four years. The settlement is subject to court approval which is expected to take several months or more. In addition, the settlement requires practice changes including decoupling of commission fees so that commissions will no longer bundled – i.e. the standard 6% split between the buyer’s and seller’s realtors. NAR will transition to a structure where each realtor’s commission is distinct and not inherently linked.

Consumers will continue to have the right to cooperative compensation as an option so long as they pursue it off-MLS through negotiation and consultation with real estate professionals.

There are many ways in which buyer realtors could be compensated, including through offers of compensation communicated off MLS, including but are not limited to:

• Fixed-fee commission paid directly by consumers
• Concession from the seller
• Portion of the listing realtor’s compensation

The impact of the NAR settlement in Canada is now being analyzed in each Province and by all brokerages and realtors. There is an evolution going on in the industry. To some degree the recent enactment of the Trust in Real Estate Services Act (TRESA) in Ontario anticipated part of this evolution.

The lawyers at Kormans LLP are continually monitoring this development and are happy to assist you with any questions that you may have on this blog, or any other legal inquiries that you may have. Please email us at info@kormans.ca or call (905) 270-6660.