Real Estate Advertising Complaints on the Increase
Tom Adams, Director, ADRE Investigations Division
K. Michelle Lind, AAR General Counsel
The Arizona Department of Real Estate ("ADRE") receives numerous advertising complaints each month. The ADRE investigates advertising complaints and takes action against those licensees whose advertising violates the ADRE Commissioner’s Rules, so it is important to be familiar with the advertising laws and ensure that your advertising is in compliance.
Advertising is broadly defined and highly regulated.
Advertising means "the attempt by publication, dissemination, exhibition, solicitation or circulation, oral or written, or for broadcast on radio or television to induce directly or indirectly any person to enter into any obligation or acquire any title or interest in [property] and any photographs, drawings or artist's presentations of physical conditions or facilities existing or to exist on the property." A.R.S. §32-2101(2). Nearly anything salespersons or brokers do to circulate their names among people, other than "keep in touch" or "thank-you" items such as gifts or birthday cards to clients, falls under the definition of advertising.
The Commissioner’s Rules, A.A.C. R4-28-502, set forth the rules for all advertising. A salesperson or broker acting as an agent is prohibited from advertising property in a manner which implies that no salesperson or broker is taking part in the offer for sale or lease. The designated broker must supervise all advertising, however, associate brokers and salespeople are responsible for insuring that their advertising is in compliance with the Rules.
The employing broker’s name must be "clear and prominent" in all advertising.
All advertising must identify in a "clear and prominent manner the employing broker's legal name or the licensed dba name." The employing broker is the corporation, limited liability company, partnership or sole proprietorship licensed as a broker that has engaged the services of salespersons and associate brokers. The employing broker designates a natural person to act as the designated broker.
The requirement that all advertising identify the employing broker’s name in a "clear and prominent manner" is by far the most common subject of complaints. Although the Rules do not specify precisely what constitutes "clear and prominent," Webster defines prominent as "thrusts itself into attention" or "conspicuous in position or importance." A primary guideline to consider when creating an advertisement is that the employing broker represents the client in the transaction and the associate broker or salesperson represents the employing broker. This relationship must be indicated in the advertisement; that is, the ad must be clear that the employing broker is involved in the process. Consider the following guidelines:
K. Michelle Lind November 2005
• The employing broker’s name must be included in all newspaper advertisements, including classified ads, real estate advertising guides, and other magazine ads.
• In advertising flyers, the employing broker’s name may be located on either the top or the bottom of the flyer however the employing broker’s name must be clearly legible.
• On any other promotional material the employing broker’s name must be on the front page or front of the object.
• The employing broker’s name must be spelled out in its entirety. For example, if an employing broker’s legal or dba name on a license includes "Southeast Valley," that is what must appear in the ad; simply saying "SE" is not sufficient.
• If the brokerage is an office of a franchise, the office must be identified; simply displaying the franchise name alone is not sufficient.
The employing broker’s name must be on each page of an associate broker or salesperson’s web site.
Web sites or emails that target Arizona residents with the offering of a property interest or real estate service also constitute advertising and is a regulated activity. A.R.S. 32-2163(D) and A.A.C. R4-28-502(L). The employing broker’s name must be visible on the first page of the web page, without the necessity of scrolling down, regardless on the screen size of the computer. Web pages should identify the broker on each page because it is possible to link to a single page and, if that is done, the broker’s name needs to be visible. In contrast, if the employing broker produces a magazine that includes only the broker's listings, the broker can be identified on just the front cover, not every page, because a consumer picks up the whole magazine, not just one page.
Teams must comply with the same advertising rules
A real estate salesperson or broker may use the terms "team" or "group" to advertise and promote real estate services if the team or group is comprised of licensed real estate salespersons or brokers who are employed by the same broker. When advertising as a team, the same advertising rules apply as when advertising as an individual broker or salesperson. All team advertising must identify the employing broker in a clear and prominent manner. For example, placing "The (Team Name) Team" at the top of the page in large letters with a much smaller brokerage symbol somewhere below (often at the bottom of the page) is not sufficient. The ad must be clear that the team is a part of the brokerage.
Other Advertising Rules
In addition, the Rules also require that:
• All advertising must contain accurate claims and representations, and fully state factual material relating to the information advertised.
• The licensee’s name must be set forth in a manner that would enable a consumer to find the licensee’s license information on the ADRE's records (including website). R4-28-302 (I).
• Licensees advertising their own property for sale must place the words "owner/agent" in the advertisement.
K. Michelle Lind November 2005
• A licensee who advertises property that is the subject of another’s listing must display the name of the listing broker in a clear and prominent manner. Prominent is determined by the criteria discussed above.
• The term "acre," either alone or modified, may be used only if referring to an area of land representing 43,560 square feet.
Advertising Rule violations result in ADRE sanctions
When the ADRE determines that an advertisement is in violation of the Rule, the ADRE will hold both the salesperson or associate broker and the designated broker responsible. Penalties for advertising violations can include monetary fines, suspension or revocation of a license, denial of the issuance or renewal of a license, issuance of a Letter of Concern or issuance of a provisional license. The ADRE will often first issue both the salesperson or associate broker and the designated broker a Letter of Concern, which will be placed in the salesperson’s and broker’s file. A "Letter of Concern" is an advisory letter to notify a licensee that, while the conduct or evidence does not warrant other disciplinary action, the Commissioner believes that the licensee should modify or eliminate certain practices and that continuation of the activities may result in disciplinary action against the licensee. A.R.S. §32-2153(F)(1). Further violations will generally result in disciplinary action, with the Letter of Concern as part of the evidence indicating the licensee was made aware of the violation and supporting the discipline.
Tip: The ADRE is interested in obtaining compliance, not in initiating discipline. Take an extra few minutes to review your advertisements to ensure they meet the requirements of the law. If you have any questions about the legality of your advertising, contact your broker or the ADRE for guidance. If you have any questions about the legality of your advertising on the Web, the ADRE will review it for compliance. Email Tom Adams at firstname.lastname@example.org and include your link, ad copy or URL.
Tom is the Director of the Investigations Division of the Arizona Department of Real Estate.
Michelle is General Counsel to the Arizona Association of REALTORS® ("AAR") and a State Bar of Arizona board certified real estate specialist.
This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.
K. Michelle Lind November 2005