Publications

Phillip C. Querin
Partner - Portland, Oregon Office

philquerin@dwt.com
(503) 241-2300

Realtor® Advertising – Part VII
[March 2008]

Background. Effective January 18, 2008, the Oregon Real Estate Agency adopted a new, temporary rule covering Realtor® advertising. It will be the seventh effort in six years that the industry has addressed this sticky issue. Recounting the evolution of the rule is like trying to name each of Elizabeth Taylor's ex-husbands – in order.¹ On July 1, 2002 the first version of the advertising rule became effective, and was replaced by a temporary rule on February 28, 2003, which was replaced by a permanent rule on August 1, 2003, which was replaced by another permanent rule on May 6, 2005, which was replaced by a temporary rule on January 1, 2007, which was replaced by a permanent rule on June 29, 2007.²

The most controversial aspect of the June 29, 2007 permanent advertising rule (which has now been replaced by the current January 18, 2008 version) was Section 6, which was – on paper – deceptively simple. It provided:

Effective March 1, 2008, if a licensee's name is used in advertising, the name of the licensee may not be in a larger type size than the licensed name or registered business name of the principal real estate broker, sole practitioner real estate broker or property manager.

In its recent filing of the new rule with the Oregon Secretary of State³ the Real Estate Agency explains the need to replace Section 6:

This provision would require a significant number of licensees to make major changes to their existing advertising, which would result in significant costs to the licensees. The rule was also confusing because many registered business names are contained in a logo and it was unclear what “type size” would be required.***

This amendment will allow real estate licensees to advertise in a less costly manner. Currently, there are 23,500 real estate licensees that will be impacted by this rule. The Real Estate Agency has used all available information to project any significant economic effect on businesses.***

If the agency did not adopt these rules, this serious prejudice would result because real estate licensees will continue to be burdened by costs of complying with the current rule.

Caveats. Before explaining the new advertising rule, a few explanations and comments are in order. First, the reason that the new advertising rule is denominated “temporary” is because that was the only efficient way for the Agency to quickly replace Section 6, which was going to become effective on March 1, 2008. By calling it a “temporary” rule rather than a permanent one, the Agency was able to make it immediately effective without having to follow the lengthy administrative process necessary to enact a permanent rule.

However, as a temporary rule, it will only remain enforceable for 180 days, after which time it will no longer be effective. In other words, it will expire automatically on July 16, 2008. Although there is no guarantee that it will become the permanent rule on July 16, it is assumed that is what will occur.⁴ During the next six months, brokers and principal brokers should closely review this new rule to evaluate whether it works for them.

Secondly, it must be emphasized that although the primary reason given by the Agency for enactment of the new temporary rule is to “fix” the problems with Section 6 of the prior rule, the new temporary rule contains some entirely new provisions regulating licensee advertising that are nowhere to be found in the earlier rule.

Licensee Advertising - Generally. This rule is intended to address all forms of advertising, including:

…representation, promotion and solicitation disseminated in any manner and by any means for any purpose related to professional real estate activity, including, without limitation, advertising by mail; telephone, cellular telephone, and telephonic advertising; the Internet, E-mail, electronic bulletin board and other similar electronic systems; and business cards, signs, lawn signs, and billboards.

All such licensee advertising must: (a) Be identifiable as advertising of a real estate licensee; (b) Be truthful and not deceptive or misleading; (c) Not state or imply that the real estate broker or property manager is the person responsible for operating the brokerage or that they are a sole practitioner or principal broker; (d) Not state or imply that the licensee is qualified or has a level of expertise other than as currently maintained by the licensee; and (e) Be done only with the written permission of the property owner(s) or owner(s') authorized agent.

Advertising in Licensee's Name. Advertising that includes the licensee's name must: (a) Use the licensee's licensed name – i.e. their name as it appears on their license. (b) Alternatively, they may use a “common derivative” of their first name, e.g. “Sue” for “Susan,” “Bob” for “Robert. Presumably, initials, such as “JB” would be permissible for James B. Smith to use in his advertising, so long as he commonly used them in lieu of his first name. However, the last name in all advertising should be exactly the same as it appears on one's license. In the event of a name change, agents should promptly have their real estate license re-issued.

Prominent Display of Name. In lieu of the comparative size provisions of Section 6 of the old rule, it is now provided that in all advertising, the licensed name or registered business name of the (a) principal real estate broker, (b) sole practitioner real estate broker, or (c) property manager, must be “prominently displayed, immediately noticeable, and conspicuous.” While these adjectives are obviously subject to some interpretation, they are clearly preferable to the prior language of Section 6, which would have resulted in automatic violations if the size of the licensee's name was larger than their company's name even though there was no risk of confusion to the public. Presumably, under the new advertising rule, whether an advertised name is “prominent,” “immediately noticeable” and “conspicuous,” will be read in conjunction with the other requirements of the rule that it must be “truthful,” “not deceptive or misleading,” and not imply that the licensee “…is the person responsible for operating the real estate brokerage.”

Submission and Review of All Advertising. Subject to one exception discussed below, all real estate brokers must, in advance: (a) Submit their proposed advertising to their principal broker for review; (b) Receive the principal broker's approval before publicly releasing any advertisement; and (c) Keep a record of that approval, making it available to the Agency upon request. Correspondingly, the principal broker must review and is responsible for all advertising by their associated brokers and property managers. If done so in writing, principal brokers may delegate direct supervisory authority and responsibility for advertising originating in a branch office to the principal broker who manages that branch office.

Advertising of Property Owned by Licensees. A licensee associated with a principal real estate broker may advertise their own property for sale, exchange, or lease option without approval of the principal real estate broker, if: (a) The property is not listed for sale, exchange, or lease option with the principal broker;

(b) The advertising states that the property owner is a real estate licensee; and (c) The advertising complies with all other applicable provisions of ORS Chapter 696 and its implementing rules.⁵ Whether companies should permit their agents to sell their own property without listing it through the brokerage is a policy decision that principal brokers will have to make. Since liability insurance coverage is normally not provided to a licensee for their personal transactions unless they listed it with their company, absent some convincing reason not to, it would appear prudent to do so.

Advertising in Electronic Media and Electronic Communications (e-mail). This provision is entirely new – it was not specifically addressed in the earlier rule. Now, all means of electronic communication, including but not limited to the Internet, web pages, e-mail, e-mail discussion groups, blogs, and bulletin boards are subject to the following requirements: (a) The advertising must comply with all other requirements of the rule, e.g. not misleading, etc.; (b) Subject to the following e-mail exception, all licensee advertising must include on its first page: (i) The licensee's name as it appears on the license (or common derivative of the first name); (ii) The licensed name or registered business name of the principal real estate broker, sole practitioner real estate broker, or property manager; and (iii) A statement that the licensee is licensed in the State of Oregon.⁶

Sponsored links (i.e. paid advertisements), such those as appearing on Google search engine results, are exempt from the “first page” disclosure requirement in (b) above, so long as the next page following the link complies. Licensee e-mail appears to be completely exempt from the “first page” disclosure requirement of (b) above, if their “initial communicati on ” complies with all other requirements of the advertising rule.

Guaranteeing Future Profits. In an effort to protect licensees from the temptation of “irrational exuberance,” the rule provides that “No advertising may guarantee future profits….” Obviously, licensees should get nowhere close to “guaranteeing” anything. To best avoid claims, all information provided to one's clients should be limited to statements of substantiated fact, rather than personal opinion. If the fact is not, or cannot be, substantiated, or is not otherwise readily apparent, the licensee should identify their source, e.g. “per county records,” etc.

Team and Group Advertising. Licensees may use the term “team” or “group” to advertise if: (a) Its use does not constitute the unlawful use of a trade name and is not deceptively similar to a name under which any other person is lawfully doing business; (b) The team or group includes at least one real estate licensee; (c) The licensee members of the team or group are associated with the same principal broker or property manager; (d) The licensee members of the team or group use each licensee's licensed name (or common derivative for the first name); (e) If the advertising includes persons on the team or in the group that are not licensed with the Agency, it “…must clearly state which individuals are real estate licensees and which ones are not.” In all other respects, such team and group advertising must comply with the other applicable provisions of ORS Chapter 696 and the related administrative regulations.

FOOTNOTES

1 Nicky Hilton, hotel-chain heir; Michael Wilding, actor; Michael Todd, producer; Eddie Fisher, singer; Richard Burton, actor; Richard Burton (again); John Warner, U.S. senator; Larry Fortensky, trucker.

2 The history of the rule is as follows: Hist.: REA 1-2002, f. 5-31-02, cert. ef. 7-1-02; REA 1-2003(Temp), f. 2-27-03, cert. ef. 2-28-03 thru 8-27-03; REA 3-2003, f. 7-28-03, cert. ef. 8-1-03; REA 1- 2005, f. 5-5-05, cert. ef. 5-6-05; REA 3-2006(Temp), f. 12-28-06, cert. ef. 1-1-07 thru 6-29-07; REA 3-2007, f. & cert. ef. 6-29-07

3 This filing may be found, in its entirety, on the Real Estate Agency's website at http://www.rea.state.or.us/.

4 However, the January 1, 2007 temporary rule was replaced by an entirely different permanent rule on June 29, 2007. The comparative size provisions of Section 6 of the June 29, 2007 permanent rule never existed in the temporary advertising rule it replaced.

5 The text of this provision appears to contain a typographical error. Currently, it reads “The advertising complies with all applicable other applicable provisions of ORS chapter 696 and its implementing rules. (Error highlighted in bold.)

6 Most licensee advertising does not specify that the licensee is actually licensed in Oregon. One has to ask if this is really necessary.

© Copyright 2008. Phillip C. Querin, Davis Wright Tremaine. No part may be reproduced without the author’s express written consent.