Brokers, owners file suit against RE commission

A group of commercial property owners and real estate brokers has filed a federal lawsuit challenging certain regulations and practices by the Kentucky Real Estate Commission.
The suit alleges that the commission has misused its regulatory authority to exclude regional and national commercial brokerage firms from the Kentucky market. The plaintiffs argue that the commission is working to protect special interests by ensuring broker payments stay within the state.


According to new regulations outlined in the commission's literature, it is improper for a broker licensed in Kentucky to aid, abet or otherwise assist any individual who is not actively licensed in Kentucky to perform real estate brokerage in this state. Kentucky has reciprocity with 19 states, and states that it is simple to become licensed in state. The regulations are hardly a way to protect local brokers against national competition. But to broker in Kentucky, you have to be willing to give up real estate jurisdiction to commission.


The prohibition includes a Kentucky broker assisting a non-Kentucky licensed individual with listing, selling or managing Kentucky property for a buyer or seller. A non-Kentucky licensed individual includes someone who may be affiliated with a national franchise and may have a license in another state, but is not actively licensed in Kentucky.


It is this regulation that has owners and investors up in arms. The commission's adoption of licensure laws violates the rights of Kentucky property owners and others under the Commerce Clause of the United States Constitution, they say. The regulations severely limit access to capital markets, preventing interstate trade and harming property values.
The National Multi Housing Council fully supports the plaintiffs in the lawsuit. If you over-regulate a sector of the market, you disrupt it and create inefficiencies; you are less likely to get optimal prices or the right mix of potential investors. If you can't bring investors or bring capital to a market, that market suffers.


National and international investors that have solidified relationships with national brokerage firms should not have to surrender their associations to comply with Kentucky regulations. Rather than forging a new relationship with a local broker, investors will simply look for other investment markets. All brokers are not created equal; they come with a wide range of skill sets and a wide range of expertise. With this regulation, the state is losing a wide range of national and international capital. All we're trying to do is join a cause that preserves open markets."


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