The California Association of Realtors appointed a task force in June 2002 to look into complaints from members about being forced to negotiate new lockbox contracts with Supra. The task force is also looking at choices in new technologies that are in development to challenge what many call a "Supra monopoly."

According to Gary Thomas, head of the task force, the purpose to the task force is to "air the grievances of associations about lockboxes and to get Supra to honor the spirit of its contracts with California associations, and to look at alternatives to Supra in the lockbox field."

He says the complaints that associations and their members have is that the associations were "forced to buy new software," and they "weren't informed that their agents would have to purchase new keys in order to access the software. They assumed that the old keys, which many associations still have under a contract, would work."

A call to Supra CEO Greg Burge asking for comment was not returned in time for publication.

Thomas explains, "There were two contracts in the old Supra agreements. One is for equipment and the other is for software. When they had the association install the new software, Supra had them sign a new software agreement with a longer term than the equipment agreement had. They did not extend the equipment agreement at the same time. All the associations assumed that the equipment agreement would be honored to go through the life of the software. It's a reasonable assumption because this vendor had been a friend of Realtors for many years."

The reason that the equipment was not part of the software agreement is that Supra intends to charge each agent an activation fee, and put them on a six-year lease for a lot of equipment they have never asked for, claims Trisha Moore, executive vice president of the EVP, Orange Coast Association of Realtors.

"We suspect that most members do not even use all the features that their current lockbox key provides and we know for a fact they have not been calling or coming to the board demanding that it perform any other functions. For these reasons we are not just jumping on the new AEIII product. The problem is, however, Supra now says they can’t, won’t, don’t want to provide the current AEII product members are using."

Explains task force member John Holly, president of SANDICOR MLS, the Supra system has three components - the lockboxes, the keys and the service computer. "Take away any of the three and you don't have a functioning system," he says. "From an MLS perspective, this dates back to circa 1999, when we had the LENI system, (that was the service computer to obtain the update codes. We use LENI to read lockboxes to see who showed properties, etc. LENI wasn't Y2K compliant, so in 1999 Supra announced to us that LENI needed to be replaced because of Y2K, and the way it would handle dates. They had a new computer called KIM. San Diego county entered into new 6-year purchase agreement for KIM and the document told us that installation of the new system would take us well into the 21st century."

Holly says he found out that the MLS only updated "a component" of the lockbox system to operate well into 21st century.

"Early in the 21st century," he says, "we were informed the keybox would be discontinued, and we didn't' have an agreement past 2000 that specifically provided for the purchase of keyboxes. We're going to need more keyboxes and the new iBoxes aren't any more expensive than the ones under the previous system, but then there is the issue of the key. The new key will open the new iBox as well as the old AEII box, but the old key that we hoped to take us into the 21st century will not open the new box. When you discontinue the old box, you have to buy the new box and upgrade keys at a substantial cost."

The Supra dilemma then isn't a lockbox exchange - it is about new keys (the new key will open the old box.)

"Had I known in advance," says Holly, "it would have made a difference in long-range planning, and when we took on the new KIM service computer and signed a 6-year agreement and looked at the new documentation, we did not anticipate the need for a specific written instrument that would force them to sell us lockboxes for that duration."

Was Sandicor given any advance knowledge that the boxes would terminate?

"No," says Holly. "We had no knowledge of the new infrared technology in the E and D keys."

Holly says he feels duped. "I feel that there was a six-year commitment, and we felt that was a commitment as we define it as service. The service is boxes, keys and a service computer. So when we opted to do a self- warranty on boxes, we purchased boxes on an as-needed basis. We didn't know they would be discontinued."

Moore says that in order to get more lockboxes, "we were forced into signing a 'letter of interim product support' at the end of April. They had us sign this because they weren't going to sell us any product (keys) because they are claiming we don't have a contract, and they are saying the contract we have with them is invalid and that is the one that provided us product like the keys and the boxes. They say the one that is valid is the software contract."

June Barlow, general counsel to the CAR, says, "They (Supra) want to introduce new technology that is inconvenient that includes downloading the whole MLS. They are giving bells and whistles that most agents don't need. Most agents just want a secure system to open the door. If this is such a great improvement in technology, they should let people choose it on their own, and it would sell on its own merits. They should have made both systems available and the ones who want the new system can buy it."

CAR and Supra face off

In a meeting that took place a few weeks ago between task force members and representatives of Supra, it was clear that the "old friend" was no more.

Said one attendee, "They were arrogant. They gave us a lot of platitudes, but they didn't move one inch from their position."

So the task force made something absolutely clear to Supra - that CAR isn't going to back down as an intermediary, and in fact, it will become the lead negotiator in future contracts.

As these new "forced contracts" run out, Supra "may end up dealing with CAR instead of individual associations," said one task force member.

CAR has other tactics to use with Supra besides a godfather-like intervention.

The association is already in communication with companies who seek to compete with Supra. In development of new lockbox products are Rapattoni and Sentrilock, among others, say task force members. Supra could win the battle, but lose the war if associations decide not to renew contracts with them, say task force members.

Is CAR building a foundation for a class-action lawsuit?

Barlow wouldn't comment on the potential for legal action, but she did say, "In California, the laws are very strong in the unfair business practices area."

Supra also needs to consider what other associations across the nation will do based on what CAR does for its association members. Thomas says that other state and local associations across the nation are watching what CAR is doing closely and that he is in frequent communication with other association leaders for updates.

The lockbox task force is scheduled to meet in June to review options.

Published: May 6, 2003

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