C.A.R. MLS/Computer and Business Technology Committee Lockbox Type Requirements – Follow Up Re Mandate and Enforcement
This Issues Briefing Paper is for Study only and has not been approved by the MLS/Computer and Business Technology Committee, Executive Committee, or the Board of Directors.
This issues briefing paper addresses an MLS’s ability to mandate that participants and subscribers place an MLS-designated lockbox on properties submitted through the service. C.A.R. Model MLS Rule 13.2.2 contains such a mandate and many MLSs have incorporated the concept into their own MLS rules. Such a mandate is permissible and has been approved by NAR. However, there are limits on how the mandate can be enforced. This paper will discuss the limitations of the mandate. It will also propose possible refinements to C.A.R. Model MLS Rule 13.2.2 to better clarify the allowable reach of the rule.
Undoubtedly, being able to access a listed property is a critical capability cooperating agents need to have in order to show it to potential buyers. To facilitate this capability, assuming seller’s consent has been obtained, it is usually commonplace for listing agents to place a lockbox on the property.
Per C.A.R. Model MLS Rule 13.6 (Written Authority), participants and subscribers shall not place a lockbox on a property without written authority from the seller and occupant if other than the seller. To this end, the C.A.R. Residential Listing Agreement standard form provides for such written authority. Seller’s authority for use of a keysafe/lockbox is granted unless seller directs otherwise by checking the box to withhold such authorization.
Thus, sellers have a right to refuse to authorize use of a lockbox, and exercising such a right will not preclude the listing from being accepted by the MLS. C.A.R. Model MLS Rule 13.6 clarifies that inclusions in MLS compilations cannot be required as a condition of placing lockboxes on listed property.
That being said, an MLS can impose a mandate, assuming a seller has authorized the use of a lockbox or other access device on the property, that the listing agent use an authorized lockbox required by the MLS where the listing has been submitted. C.A.R. Model MLS Rule 13.2.2 provides as follows:
13.2.2 Lockbox Type Requirements. Participants and Subscribers who utilize lockboxes or other access devices shall use the designated or authorized lockbox required by the MLS where the listing is submitted. More than one lockbox or access device may be used on a property as long as one of them is the lockbox designated or authorized by the MLS where the listing is submitted.
C.A.R. Model MLS Rule 13.2.2 was adopted in response to an increasingly frustrating practice by many listing brokers in placing non-lockbox (ex: combo lock or digital doorknob) entry devises on the property. The practice has been most pronounced with listing agents holding vast numbers of distressed properties. Sometimes the access codes for these devises were not communicated through the MLS or communicated with errors, causing immediate impairment of access once an unsuspecting cooperating agent and prospective client arrived at the property to see it. In other instances where non-lockbox devises have been installed, instructions for cooperating agents to telephone for an access code have been met with non-responsiveness or automated telephone response purgatory on the other end.
To provide for greater cooperation and needed standardization of access for such listings otherwise authorized by the seller to utilize a lockbox, Rule 13.2.2 requires that participants use the designated lockbox required by the MLS where the listing is submitted. Other devises may also be present, but at least one of them is required to be an authorized lockbox.
As already stated, NAR has approved C.A.R. Model Rule 13.2.2. There are, however, limitations on the extent to which the mandate can be enforced.
First, as previously discussed, Rule 13.2.2 could not be enforced where a seller has refused to authorize placement of a lockbox/keysafe.
Second, per NAR Policy Statement 7.31 – Lock Box Security Requirements, participation in a lockbox program is to be voluntary. That means that it would go against NAR policy for an MLS to compel its participants and subscribers to join the lockbox program. However, if they do participate in the lockbox program, the MLS may then regulate lockbox conduct by requiring that they use the designated lockbox required by the MLS where the listing is submitted. So the mandate in Rule 13.2.2 can only be enforced against one who is already otherwise a participant in the lockbox program.
These limitations on how 13.2.2 should be enforced are already implied or stated elsewhere in the C.A.R. Model MLS Rules. However, to better clarify the circumstances, the Committee may wish to revise the language of Rule 13.2.2. A proposed revision is set forth below for the Committee’s consideration.
PROPOSED MLS RULE REVISION:
13.2.2 Lockbox Type Requirements. Participants and Subscribers who
participate in the lockbox program and have seller’s (and occupant’s if other than the seller’s) written authority to utilize lockboxes or other access devices shall use the designated or authorized lockbox required by the MLS where the listing is submitted. More than one lockbox or access device may be used on a property as long as one of them is the lockbox designated or authorized by the MLS where the listing is submitted.
That, upon final approval by NAR, C.A.R. Model MLS Rule 13.2.2 be revised as set forth above.
POSSIBLE OTHER IDEAS:
Since the lockbox mandate has been an ongoing battleground in certain areas, some may find that they wish to further push the bounds of NAR policy laid out in this paper and ask NAR to consider amending NAR Policy Statement 7.31 in some way. One idea would be to request an amendment of the policy to state that by using the MLS to convey access devise codes or instructions, one has “voluntarily participated” in the lockbox program such that an MLS may require use of its authorized lockbox for listings submitted to the Service. Candidly, however, such an interpretation falls outside the seemingly plain meaning of NAR Policy Statement 7.31 and would be a tough sell. Alternatively, another approach might be to explore allowing an MLS to prohibit listing brokers from using the MLS to convey access code instructions altogether.
While either such policy change might embolden an MLS’s ability to more broadly enforce the 13.2.2 lockbox mandate, the first one would face tough NAR policy hurdles and both may also create ultimately more harmful consequences for cooperating brokers such as a total removal of any access instructions for listings. Should such a consequence result, it could further reduce the productivity of the MLS and ultimately make accessing such properties even harder.
At the root of some of the lockbox struggles is the current distressed market and the seeming uptick of uncooperative and unprofessional conduct it seems to have spawned. As such, it is worth directing your attention to a link to a previous legal article drafted for this Committee and C.A.R. membership at large:
REO Related Sharp Practices, March 16, 2011 Learn more about how the Code of Ethics and MLS Rules are implicated in certain sharp practices associated with the plethora of distressed and REO properties on the market.
Finally, likely another outgrowth of the difficult market, C.A.R. staff has received reports from MLSs of an increased instance of MLS participants and subscribers sharing MLS passwords and lockbox keys. Please note that the sharing of passwords and keys with others is a clear violation of MLS Rules fined at the highest tier of the C.A.R. Model Citation Policy.
C.A.R. Model MLS Rule 12.12 on Confidentiality of MLS Information provides in pertinent part, ”Any information provided by the service to the Participants and Subscribers shall be considered and treated as confidential by Participants and Subscribers and shall be for the exclusive use of the Participants and Subscribers for [permitted] purposes…Participants and Subscribers shall at all times maintain control over and responsibility for each copy of any MLS compilation leased to them by the A.O.R. and shall not distribute any such copies to persons other than Participants and Subscribers. Participants and Subscribers are responsible for the security of their passcodes and shall not give or allow use of or make available their pass codes to any person….”
C.A.R. Model MLS Rule 13.2 on Key Use and Service states, “Keys may not be used under any circumstances by anyone other than the key holder, including, but not limited to, lending, borrowing or sharing keys with others.”