A recent memo from the legal department of the National Association of Realtors® (NAR) highlights the fact that, with the exception of extraordinary circumstances, courts will not review or overturn discipline imposed by a Realtor® association on one of its members for violating the Code of Ethics.

Not all real estate licensees become members of the local, state, and national associations of Realtors®. Those who do become Realtors® agree to abide by the Realtor® Code of Ethics. They also agree to be governed by the extensive set of rules, procedures, and interpretations set forth in the NAR Code of Ethics and Arbitration Manual.

Included in that manual is a waiver which states that every member "waives any right of action against the Board, any Board Member, or any member of a Hearing Panel or tribunal arising out of any decisions, determinations, or other action taken or rendered under these procedures in the absence of willful or wanton misconduct."

Now, personally, I doubt that even 5 percent of the members have read that waiver section or most of the other sections of the manual; but that is another issue. As is the case with insurance policies and hospital forms, they have agreed to be bound by the provisions contained therein.

The case at hand involved a Realtor®, Dean Borland, who was a member of the West Michigan Lakeshore Association of Realtors® (WMLAR). (For those paying close attention: the terms Board of Realtors® and Association of Realtors® may be used interchangeably.) Part of Mr. Borland's business included renting "houses, townhomes, and condominiums to tourists for vacation use."

In 2005 Mr. Borland rented a house to a family for vacation use. As a result of things that went on in that transaction, the renters filed a complaint against the agent with WMLAR. In accordance with its procedures, the association held a hearing on the complaint. The hearing resulted in a discipline for Mr. Borland. Borland filed a request for a review (the process allows for hearing panel decisions to be reviewed by the association's board of directors), but the appeal was denied.

Borland then filed a lawsuit against the association. His argument was curious, to say the least. He stated that the association had exceeded its authority, because it was only empowered to discipline its members for actions regarding real estate activities, and, he argued, vacation rentals did not constitute real estate transactions. The merits, or lack of merits, of Borland's arguments, though, were not of consequence to the outcome.

WMLAR moved for summary disposition -- essentially, dismissal -- which was granted. On appeal, the appellate court affirmed the lower court's decision. The appellate court wrote that "the disciplinary action was not subject to judicial review." It referred to the waiver provision (noted above) in the Code of Ethics and Arbitration Manual. "The waiver provision at issue here is unambiguous and clearly reflects an intent to bar a lawsuit such as the one initiated by the plaintiff.

Indeed, there was no evidence of 'willful or wanton misconduct' on the part of WMLAR, and the plaintiff's complaint does not even allege such conduct. Under the circumstances, plaintiff simply cannot circumvent the Code of Ethics and the rulings of WMLAR by resorting to a lawsuit in the circuit court."

From time to time more than a few Realtor® members have expressed frustration that the enforcement of the Code of Ethics lacks sufficient "teeth." And this may be so. It is certainly understandable, in our overly-litigious society, that ethics panels and association directors might be reluctant to impose strong disciplinary measures, because they fear retaliation by lawsuit. The ruling in Borland v. WMLAR might help to allay those fears. To be sure, this is a Michigan decision. Nonetheless, it should be of interest to Realtor® associations around the country.