PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Amendment of section 175.25 of Title 19 NYCRR.
Statutory authority:
Real Property Law, section 442-k(1)
Subject:
Real estate advertising.
Purpose:
To provide guidance and protection pertaining to advertising by real estate licensees.
Text of final rule:
Existing 19 NYCRR Section 175.25, Advertising is repealed.
A new Section 175.25, Advertising is added as follows:
175.25 Advertising
(a) Definitions
1. “Advertising" and "advertisement" mean promotion and solicitation related to licensed real estate activity, including but not limited to, advertising via mail telephone, websites, e-mail, electronic bulletin boards, business cards, signs, billboards, and flyers. “Advertising” and “advertisement” shall not include commentary made by a duly licensed real estate salesperson, real estate associate broker or real estate broker that is not related to promoting licensed real estate activity.
2. “Team” means two or more persons, one of whom must be an associate real estate broker or real estate salesperson, associated with the same real estate brokerage who hold themselves out or operate as a team.
3. “Real estate brokerage” means a real estate company represented by a real estate broker.
4. “Logo” means a graphic mark used to identify a real estate broker, associate broker, salesperson or team, but not a photograph of a real estate broker, associate broker, salesperson or team contained in an advertisement.
5. “Property” means real property or shares of stock in a cooperative corporation.
(b) Placement of advertisements
1. Only a real estate broker is permitted to place or cause to be published advertisements related to the sale or lease of property. Advertisements placed or caused to be published by an associate real estate broker, a real estate salesperson or a team for the sale or lease of property listed with or represented by a real estate broker are not permitted except where the property is listed with or represented by the real estate broker with whom the associate real estate broker, real estate salesperson or team placing the ad is associated and said real estate broker approved placement of the advertisement.
2. Authorization
a. No property shall be advertised unless the real estate broker has obtained authorization for such advertisement from the owner of the property or as hereinafter provided.
b. Real estate brokers shall not advertise property that is subject to an exclusive listing held by another real estate broker without the permission of the listing broker.
c. Proprietary information. Photographs of property that are posted on a real estate broker’s website shall not be used or reproduced without written permission from the copyright holder of such photographs.
(c) Content of advertisements
1. Name of real estate broker. Advertisements shall indicate that the advertiser is a real estate broker or provide the name of the real estate broker or real estate brokerage and either: (i) the full address of the real estate broker or real estate brokerage or, (ii) the telephone number of the real estate broker or brokerage.
2. Name of associated licensees. The advertisement may include the names of one or more associate real estate brokers or real estate salespersons associated with the real estate broker or brokerage placing the advertisement. Where an advertisement includes the name of an associate broker, real estate salesperson or a team, the name of the real estate broker and/or real estate brokerage must also be printed in the advertisement.
3. Nicknames. Real estate brokers, associate real estate brokers, and real estate salespersons shall advertise using the name under which said real estate broker, associate real estate broker or real estate salesperson is licensed with the Department of State. A nickname may be used in an advertisement provided that the full-licensed name is listed clearly and conspicuously.
4. License type. Except as provided in subsection (d) of this section, advertisements shall correctly and accurately state the type of license held by the real estate broker, associate real estate broker or real estate salesperson named in the advertisement. Licensees may abbreviate the type of license held, provided that such abbreviation is not misleading. The use of the titles, “sales associate”, “licensed sales agent” or simply “broker” is prohibited. Real estate brokers, associate real estate brokers or real estate salespersons who have additional titles or designations are permitted to advertise such titles or designations.
5. Contact information. An associate real estate broker, real estate salesperson or team may provide additional contact information, such as a post office box, in an advertisement.
6. Home offices. A residence may be used as an office provided that it is properly licensed by the Department of State.
7. Telephone numbers. Notwithstanding subdivision (c)(1) of this section, a real estate broker, associate broker, real estate salesperson or team may provide telephone numbers other than that of the brokerage in an advertisement, provided that the advertisement clearly identifies the type of such other telephone number as desk, home, cell phone, or otherwise.
8. Logos. A real estate team, associate real estate broker or real estate salesperson may use a logo different from that of the real estate broker or real estate brokerage with whom they are associated, provided that the name or logo of the real estate broker or real estate brokerage is also printed in the advertisement.
9. Property description. Advertisements shall include an honest and accurate description of the property to be sold or leased. All advertisements that state the advertised property is in the vicinity of a geographical area or territorial subdivision shall include as part of such advertisement the name of the geographical area or territorial subdivision in which such property is actually located. Use by real estate brokers, associate real estate brokers and real estate salespersons of a name to describe an area that would be misleading to the public is prohibited.
10. Guaranteed Profits. Advertisements shall not guarantee future profits from any real estate activity.
(d) Additional requirements and exceptions
1. Classified Advertisements. Classified and multi-property advertisements shall indicate that the advertiser is a real estate broker or brokerage; or provide the name of the real estate broker or real estate brokerage. Classified and multi-property advertisements may omit the license type of any associate real estate broker or real estate salesperson named in the advertisement.
2. Business Cards. Notwithstanding subdivision (c) of this section, business cards must contain the business address of the licensee and the name of the real estate broker or real estate brokerage with whom the associate real estate broker or real estate salesperson is associated. All business cards must also contain the office telephone number for the associate real estate broker, real estate salesperson or team.
3. Web-based advertising
a. Websites created and maintained by associate real estate brokers, real estate salespersons and teams are permitted, provided that said associate real estate brokers, real estate salespersons and teams are duly authorized by their supervising real estate broker to create and maintain such websites and such websites remain subject to the supervision of the real estate broker with whom the licensees are associated while the website is live.
b. Every page of such a website shall include the information required by these rules and regulations. In addition, a link to the broker or brokerage website with whom the associate broker, salesperson or team is associated is required on the homepage of the associate broker, salesperson or team website unless the broker or brokerage does not have a website.
4. E-mail. An initial e-mail from a real estate broker, associate real estate broker, real estate salesperson or team to a client or potential client shall provide the information required by these rules and regulations. Such information may be omitted from subsequent e-mail communications to the same recipient.
5. For-Sale Signs. Notwithstanding subdivision (c)(1) of this section, unless otherwise prohibited by local law, any property listed through a real estate broker must be advertised as such, and any signage placed upon such property soliciting the sale or lease of the property must identify the representative broker or brokerage.
6. Advertisements referencing property not listed with broker. Any advertisement that references or includes information about a property that is not listed with the advertising broker or was not sold by the advertising broker shall prominently display the following disclaimer: “This advertisement does not suggest that the broker has a listing in this property or properties or that any property is currently available.” Such advertisement: (i) shall not suggest, directly or indirectly, that the advertising broker was involved in the transaction and (ii) shall not refer to property currently listed with another broker absent consent provided pursuant to subdivision (b)(2)(b).
(e) Teams
1. Team name. Team names shall either: (i) include the full licensed name of the real estate brokers, associate brokers or real estate salespersons who are part of said team, or (ii) if the names are not included, the team name must be immediately followed by “at/of [full name of the broker/brokerage].” Team names shall use the term “team.” The use of any other terms besides “team,” such as “associate,” “realty” or “group” is prohibited. The use of the name of a non-licensed individual in a team name is prohibited. For twelve months after the adoption of this regulation, teams that have changed their name to comply with this provision shall be entitled to state in advertisements under their new name that they were ‘formerly known as’ their prior team name.
2. Unlicensed team members. If any unlicensed individuals are named in advertising for a team, the advertisement must clearly and conspicuously state which individuals are real estate licensees and which ones are not.
Final rule as compared with last published rule:
Nonsubstantive changes were made in section 175.25(b)(2)(b), (c)(1), (d)(1), (3)(a), (b), (5), (6) and (e)(1).
Text of rule and any required statements and analyses may be obtained from:
Whitney Clark, NYS Department of State, Office of Counsel, 1 Commerce Plaza, 99 Washington Avenue, Albany NY 12231, (518) 473-2728, email: whitney.clark@dos.ny.gov
Revised Regulatory Impact Statement
1. Statutory Authority:
Real Property Law (RPL) Article 12-A prescribes requirements for individuals and business entities to act as a real estate salesperson and/or real estate broker (hereinafter referred to collectively as “real estate licensees”). RPL § 441-c(1)(a), among other provisions, permits the Department of State to impose sanctions against real estate licensees for dishonest or misleading advertising.
RPL § 442-k(1) authorizes the New York State Board of Real Estate to promulgate regulations to administer and effectuate the purposes of Article 12-A of the Real Property Law (“Article 12-A”). To fulfill this purpose, the Department of State, in conjunction with the New York State Board of Real Estate, has issued rules and regulations which are found at Part 175 of Title 19 NYCRR and is proposing this rule.
2. Legislative Objectives:
Article 12-A, requires the Department of State to license and regulate real estate licensees. One of the purposes of Article 12-A is to ensure that real estate licensees deal honestly and fairly with members of the public. This proposed rule advances this legislative intent by providing guidance to real estate licensees on proper advertising practices so as to ensure that said advertisements are not false or misleading.
3. Needs and Benefits:
The proposed rule making will protect consumers, provide guidance to real estate licensees and meet the legislative intent of Article 12-A.
The Department of State investigates and prosecutes alleged violations of Article 12-A by real estate licensees, including those involving misleading and false advertising. Agency hearing determinations provide guidance on what constitutes “dishonest and misleading advertising.” Many years ago, the Department of State prepared and circulated informal advertising guidelines that incorporated many of the principals found in these agency hearing determinations. With the passage of time and changes in technology, these guidelines have become dated and no longer accurately reflect current advertising trends.
As a service to real estate licensees, Department of State staff routinely speak at meetings of local boards and trade associations and provide informal opinions to real estate licensees by telephone and letter. Up to 50% of the questions asked of Department of State staff by real estate licensees pertain to issues of advertising. The number of questions received by the Department on this issue and the number of real estate advertising issues encountered in administrative hearings, make it evident that the industry is in need of guidance on proper advertising practices, particularly with regard to internet advertising and marketing by “real estate teams.”
A real estate team is a group of real estate licensees working for a single real estate broker. Real Property Law section 441(1)(d) requires a real estate broker to supervise real estate licensees associated with him or her. Increasingly, real estate teams are placing misleading advertisements that make it appear as though they are a separate real estate company and not under the guidance and supervision of their representative broker.
With new technology and the evolving forms of advertising by real estate licensees, concerns have arisen over contemporary advertising related issues. In October 2006, the Council of the City of New York released a study into deceptive advertising practices by real estate licensees and recommended that the NYC Department of Consumer Affairs take immediate action to monitor the online advertising practices of New York City real estate licensees.
The proposed rule incorporates agency hearing determinations and provides a framework for real estate licensees on how to advertise in a way that complies with Article 12-A. This will benefit consumers by ensuring that they are not misled by false and/or misleading advertisements. It will also benefit real estate licensees by providing them with guidance on how to advertise in a manner that is compliant with statutory limitations.
4. Costs:
a. Costs to regulated parties:
The proposed rule making will not impose costs on those real estate licensees who choose to place advertisements unless the text of any existing advertisement has to be changed to comply with the proposed regulations. Advertising costs vary based on method and location.
Print advertising rates range from approximately $8.00 to $289 for a column inch of black and white advertising space. The cost of advertising in the classified section of a newspaper varies based on the frequency of the advertisement and whether the advertisement is placed in the daily or Sunday newspaper. These advertising rates range from approximately $9.00 to $21.00. The estimated cost of a radio ad is $50 for a 30 second radio spot. Internet advertising rates vary from free to $500 per month based on the website, size and type of the advertisement placed. Other websites charge a fee based on the number of real estate advertisements placed. Craigslist.org, a website that is commonly used by real estate licensees, charges a fee of $10 per real estate ad in New York City and allows free posting on backpage.com. Billboard advertising rates vary from approximately $400 to $12,750 per month.
b. Costs to the Department of State:
The rule does not impose any costs to the Department of State. Rather, the proposed rule making will likely decrease the enforcement-related costs incurred by the agency. Many of the advertising-related complaints which the Department of State receives are the result of inadvertent, unintentional errors by real estate licensees. The proposed rule making will provide guidance to the industry and reduce the number of advertising-based complaints. This will save costs associated with the staff time needed to investigate and pursue these complaints.
5. Local Government Mandates:
The rule does not impose any program, service, duty or responsibility upon any county, city, town, village, school district or other special district.
6. Paperwork:
The rule does not impose any new paperwork requirements insofar as advertisements are not among those records which real estate licensees are required to retain for a period of three years. (See 19 NYCRR section 175.23).
7. Duplication:
This rule does not duplicate, overlap or conflict with any other state or federal requirement.
8. Alternatives:
Initially, the Department of State considered merely updating the informal advertising guidelines. After consulting with the New York State Board of Real Estate, however, it was determined that enforceable regulations were required in order to adequately protect the public from dishonest and misleading advertising practices.
In preparing the proposed rule making, the Department of State reviewed advertising laws and regulations from other states. In addition, the Department of State worked closely with the two largest real estate trade associations (NYSAR and REBNY) in reviewing and drafting the proposed rule making. Various proposals were reviewed and considered, including the following.
It was proposed that membership in real estate teams be limited so as to require an associate broker to be a named member of any real estate team. After consideration, however, it was determined that this proposal could foster the false impression that a team is a separate real estate office and not under the guidance and supervision of the representative broker.
The Department of State also considered requiring real estate teams to immediately comply with all of the regulations upon adoption. In consultation with the New York State Real Estate Board and regulated parties, however, it was determined that some real estate licensees have developed a client base and business reputation under a particular team name that will be prohibited by the proposed regulations. To permit these licensees to acquaint the public with the new team name, it was decided that real estate teams may, for a one-year period following the adoption of the rule, continue to place advertisements indicating that they were ‘formerly known’ as the old team name.
Another alternative considered was to require certain content in all advertisements, such as the license category of the real estate licensee and the address of his or her broker. After consultation with the board and trade associations, however, it was determined that this content was not necessary in all advertisements and that for certain types, such as classified advertisements, an abbreviated form of advertising should be allowed so as to minimize advertising costs.
9. Federal Standards:
There are no federal standards regulating the registration of real estate licensees. Consequently, this rule does not exceed any existing federal standard.
10. Compliance Schedule:
To afford time to notify licensees of the new regulation and permit adequate time to bring existing advertisements into compliance, the Department of State intends the proposed rule making to be effective on January 2, 2014. Given the extensive outreach to the regulated public and efforts to include the two largest trade groups (NYSAR and REBNY) in the rule development, licensees will have had adequate notice of the proposed regulation. As such, the Department of State is not providing for a cure period prior to enforcement of these regulations.
Revised Regulatory Flexibility Analysis
1. Effect of rule:
The rule will apply to real estate brokers and salespeople (“real estate licensees”) who are licensed pursuant to Article 12-A of the Real Property Law. The Department of State (the “Department”) currently licenses 108,896 real estate licensees, many of whom work for small businesses.
The rule does not apply to local governments.
2. Compliance requirements:
The proposed rule making does not impose any reporting or recordkeeping requirements on real estate licensees. All real estate licensees, however, will be required to comply with the proposed rule making in the event that it is adopted as regulation. Real estate licensees are not required to advertise their services. If they do so, however, the content of said advertisements will need to conform with the requirements and limitations of the proposed rule making.
3. Professional services:
Real estate licensees will not need to rely on professional services to comply with the requirements of the proposed rule, which merely limits and prescribes the content of advertisements. To place advertisements, however, real estate licensees will need to contact and work with the source of the advertisement, be it a newspaper, billboard, internet provider or other source, to arrange for the placement of the advertisement.
4. Compliance costs:
The proposed rule making may, but will not necessarily, impose costs on those real estate licensees who place advertisements that contain the information required by the proposed regulations. Advertising costs vary based on method and location.
Print advertising rates range from approximately $8.00 to $289 for a column inch of black and white advertising space. The cost of advertising in the classified section of a newspaper varies based on the frequency of the advertisement and whether the advertisement is placed in the daily or Sunday newspaper. These advertising rates range from approximately $9.00 to $21.00. The estimated cost of a radio ad is $50 for a 30 second radio spot. Internet advertising rates vary from free to $500 per month based on the website, size and type of the advertisement placed. Other websites charge based on the number of real estate advertisements. Craigslist.org, a website that is commonly used by real estate licensees, charges a fee of $10 per real estate ad in New York City and allows free posting on backpage.com. Billboard advertising rates vary from approximately $400 to $12,750 per month.
5. Economic and technological feasibility:
The Department has determined that it will be economically and technologically feasible for small businesses to comply with the proposed rule. The limitations and requirements of the content of advertisements that would be imposed by the proposed rule making will not increase the costs of advertising. The costs of placing advertisements that are compliant with the proposed regulations are the same as placing advertisements that do not comply with the rule. As such, it will be economically feasible for small businesses to comply with the proposed rule.
It will also be technologically feasible for small businesses to comply with the proposed rule. The proposed rule making better defines ‘false and dishonest advertising’ by offering simple and easy to follow guidance on the content of advertisements. Real estate licensees, including those working for small businesses, will not have to rely on special technology to conform the content of their advertisements to the requirements of the proposed rule making.
6. Minimizing adverse economic impact:
The Department of State has not identified any adverse economic impact of this rule. The rule does not impose any additional reporting or recordkeeping requirements on real estate licensees and does not require licensees to take any affirmative acts to comply with the rule other than conforming the content of any advertisements which they choose to place with the requirements of the proposed rule making.
While communicating with the regulated public about the proposed rule, the Department of State was informed that requiring real estate teams to change their names immediately upon adoption of the rule could negatively impact these teams. It was explained that real estate teams may have developed a business reputation under an old team name that will need to be changed so as to comply with the proposed rule making. So as to minimize any adverse economic impact on these licensees, the Department of State is allowing a one-year grace period, during which time real estate teams may indicate in their advertisements that they were ‘formerly known as’ the old team name.
7. Small business participation:
Prior to proposing the rule, the Department of State discussed the proposal at several public meetings of the New York State Board of Real Estate, the minutes of which were posted on the Department’s website. The Department of State also worked closely with the two largest trade associations of real estate licensees (NYSAR and REBNY) in drafting the proposed rule making. These trade associations represent real estate licensees throughout the State, including those who work for small businesses. The Department of State will continue its outreach after the rule is formally proposed as a Notice of Proposed Rule Making in the State Register. The publication of the rule in the State Register will provide additional notice to small businesses. Additional comments will be received and entertained by the Department.
8. Cure period:
The Department of State is not providing for a cure period prior to enforcement of these regulations. The proposed rule making will be effective on January 2, 2014. The Department of State deems a delayed effective date sufficient to provide notice to licensees that the rule has been adopted and adequate time to bring existing advertisements into compliance. Prior to proposing this rule, the Department conducted extensive outreach to regulated parties including involving the two largest trade groups (NYSAR and REBNY) in the rule development. As such, licensees will have adequate notice of the proposed regulation.
Revised Rural Area Flexibility Analysis
The Department of State has determined that the revisions made to the rule as proposed are not substantial and, as such, do not create a need to issue a Revised Rural Area Flexibility Analysis.
Revised Job Impact Statement
The Department of State has determined that the revisions made to the rule as proposed are not substantial and, as such, do not create a need to issue a Revised Job Impact Statement.
Initial Review of Rule
As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2016, which is no later than the 3rd year after the year in which this rule is being adopted.
Assessment of Public Comment
The Department of State received numerous comments on the proposed rule. While all were considered, several were discussed at length with the NYS Board of Real Estate and certain non-substantial revisions were made.
The first comment considered was a concern that the proposed rule would make it difficult for commercial brokers to cooperate with each other in bringing transactions to completion due, in part, to a provision of the proposed rule that required written permission of the listing broker before another broker could advertise property subject to an exclusive listing agreement. The NYS Board of Real Estate determined that the intent of the regulation was to ensure that consent to advertise the listing of another is obtained and that this consent can be evidenced by writing or by other methods. To provide flexibility yet still fulfill the original intent of the proposed regulation, the word “written” was removed from 175(b)(2)(b).
Another comment correctly noted that the Department of State’s current advertising regulations require that: “…all advertisements placed by a broker must indicate that the advertiser is a broker, or give the name of the broker and their phone number.” (Emphasis added). As originally proposed, the rule changed this provision to require that, “advertisements shall indicate that the advertiser is a real estate broker and provide the name of the real estate broker…” (Emphasis added). Concern was expressed that such a small change could result in increased advertising costs to licensees. The text as proposed changed the wording or the original regulation inadvertently and, as such, the NYS Board of Real Estate revised 175.25(c)(1) to address the concern raised in this particular public comment.
A technical correction was made to section 175.25(d)(6) to address concern that the proposed regulation did not reflect the regulatory intent and would actually permit false and deceptive advertising under certain circumstances. The language was revised accordingly.
A similar technical correction was made to 175.25(e)(1), based on a public comment that the intent of the regulation was to require team names to only use the term “team” and that, as drafted, the proposed regulation permitted the use of other terms. The language was revised to accurately reflect the intent of the regulation.
Section 175.25(d)(1) of the rule addresses classified and multi-property advertisements. For these types of advertisements, the rule as proposed permitted licensees to omit the license type of the real estate licensee named in the advertisement. The intent of this particular regulation is to permit licensees to save advertising costs while still providing truthful and necessary information to the public. Concern was expressed that because this particular provision is subject to the general advertising requirements set forth in section 175.25(c)(1), advertising costs would still be unnecessarily high given the need to also print the broker’s address or telephone number. The NYS Board of Real Estate revised the language to address this concern.
Concern was also expressed over the web-based adverting provisions found in sections 175.25(d)(3)(a) and (b) of the proposed regulation. It was argued that requiring subordinate licensees (teams, associate brokers and salespeople) to link to the broker’s website from every page of a website created and maintained by a subordinate licensee was unduly burdensome. The NYS Board of Real Estate addressed this concern by requiring a link on only the home page of a subordinate licensee website while still requiring every page of said website to include the name and address of telephone number of the real estate broker or brokerage.
Finally, several comments were received about for-sale signs. (Section 175.25(d)(5). As proposed, the rule required this signage to include the office telephone number of the brokerage. This would make a large number of signs obsolete and require their replacement at great expense to licensees. The NYS Board of Real Estate addressed this concern by removing the office telephone number requirement and revised the language to require that the signage include the name of the broker or brokerage.
