Menu

Licensee Advertising

The Department of State's licensing regulations include a specific provision addressing broker advertising. Section 175.25 states as follows:

"(a) All advertisements placed by the broker must indicate the advertiser as a broker or give the name of the broker and his telephone number.

(b) All advertisements placed by the broker which state that property is in the vicinity of a geographic area or territorial subdivision must include as part of such advertisement the name of the geographical area or territorial subdivision in which the property is actually located".

License Law Enforcement Policy

The Department of State has long taken a position that licensees are required to know local laws and ensure that their advertising does not mislead purchasers. The underlying concern is that advertisements should not suggest multi-family use which is impermissible. Particularly where local authorities enforce zoning (e.g. restriction on number of living units) and building codes (e.g. certificates of occupancy) DOS will prosecute brokers for untrustworthiness "violations" if advertising suggests that property is being offered in violation thereof.

Under the Real Property Law, the Department of State is vested with discretion to determine, in the first instance, what conduct is deemed "untrustworthy" or "incompetent". As a practical matter, considerable deference is given to DOS' determinations under the applicable standards of judicial review. Licensees have had considerably more success in challenging DOS' position as a matter of law (see e.g. Matter of Campagna vs. Shaffer, 73 N.Y. 2d 237), than on questions of fact, where the administrative determination merely must be supported by "substantial evidence". At a minimum, a broker enmeshed in a disciplinary adjudication will incur substantial "transaction costs", including time, legal fees and uncertainty.

DOS has provided guidance as to its enforcement policy regarding advertising. In its April 8, 1998 memorandum, the Division of Licensing advised that any mention of a possible second apartment without clear indication that a permit would be required is deemed to be "untrustworthy". The following terms are held suspect by DOS: "mother/daughter", "second kitchen", "income producer", "income possible". Moreover, DOS admonished, as being an extreme violation, against the advertising of a one or two family house "with three, four or five or more incomes noted". More recently, Secretary of State Treadwell noted that while it may be permissible to advertise a property that would be easily divided into two separate living units, but is located in an area zoned for single family as a "potential" mother-daughter, when does the broker assume the obligation of (I) making it clear to prospective buyers that the "mother-daughter" legal status of the property can only be achieved through formal application by the buyer for a variance, or (II) advising the buyer to seek the advice of their attorney or local officials regarding the lawful use of the property (see June 1996, Empire State REALTOR, p.7).
DOS has issued "Notice of Violation" regarding advertising of "second kitchen" or "hospitality suite". DOS provides the opportunity to plead "guilty", with fines ranging between $250 to $1,000. In these cases, DOS bears the initial burden of proof of establishing a violation, as a matter of law and fact. If "untrustworthiness" is found, however, the standards of administrative review (which are quite deferential to DOS) will apply.

It is suggested that the following "rules of thumb" apply to advertising:

  • Do not advertise a use which is in violation of local zoning or building ordinances
  • Review advertisements from the perspective of whether they could mislead the reader as to the permissible use of the premises
  • Take reasonable steps to ensure the factual accuracy of the attributes claimed in the advertisement
  • Take reasonable steps to ensure that the claimed attributes are not in violation of local ordinances
  • If you have reason to know that the configuration of the premises is in violation of local ordinances, recommend to seller clients that they remedy the problem
  • If premises appear to be out of compliance with local ordinances, notify prospective purchasers that the property may only be used in compliance with all applicable ordinances.

While listing brokers are not responsible for the owner's compliance, licenses must avoid aiding or abetting such violations. In the event it should be known that the premises are out of compliance, the broker must take reasonable steps to avoid any explicit or implicit misrepresentation to a potential purchaser. It is recommended that REALTOR firms establish office policies to promote understanding of local requirements and referral to government authorities and/or attorneys fees for any legal interpretations which may be desirable. In all events, REALTORS should be alert to DOS' views regarding improper advertising.

Featured Content

Fourth quarter Legal Lines now available

The fourth quarter 2017 Legal Lines is now available. This edition covers the misclassification of employees, escrow deposits, agricultural district disclosures and more. Learn more

legal-NYSAR-180x150-2016
Legal