Disclosing Relationship to Party

QUESTION: My sister is the sole owner of a construction company which lists its new homes for sale with my brokerage firm. Do I have to disclose the fact that the owner of  the construction company is my sister? If the answer is yes, how and when should I make disclosure?

ANSWER: Article 4 of the REALTOR® Code of Ethics requires REALTORS® to “make their true position known” when they are involved in the purchase or sale of real  property where they themselves are the buyer or seller or where the buyer or seller is “any member of their immediate families, their firms or any member thereof, or any  entities in which they have any ownership interest…” According to the NAR Code of Ethics and Arbitration Manual (Section 1(l)), the term “Immediately Family” “…includes,  but is not limited to, the REALTOR® and the REALTOR®’s spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren, and other  descendants.” Although siblings are on the list, one could argue that Article 4 doesn’t apply to your situation since you don’t have any ownership interest in your sister’s  construction company, and since your client—the construction company—is not a member of your immediate family. However, since the owner of the company is a member  of your immediate family, you should consider making disclosure anyway just to be on the safe side, especially as there would not appear to be any downside in doing so. As  to how you go about disclosing, Standard of Practice 4-1 requires disclosure to be in writing and provided prior to the signing of any contract. Disclosing your relationship to  the owner of the selling company in the sales contract itself would be sufficient to satisfy the requirements of Article 4, but you could handle it differently too, so long as the  disclosure is made in writing prior to the execution of a contract.

We also should note that NAR’s model MLS rules and regulations require disclosure in MLS where the listing firm or one of its members has an ownership interest in the  listed property. Since you don’t have any ownership interest in the listings of your sister’s construction company, you probably wouldn’t be covered by this rule, but you should check with your own MLS to make sure and, even if the MLS rule doesn’t apply in your situation, there wouldn’t be any harm in making disclosure in MLS in addition to  making disclosure to interested buyers.

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Filed Under: Code of Ethics,