U.S. realtors to change commission rules as part of $418M settlement

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A major U.S. realtor group has agreed to implement rule changes and pay out a multi-million dollar settlement to homeowners, ending a four-year class-action lawsuit regarding broker commissions, a landmark outcome that is giving hope to lawyers pursuing a similar action in Canada.

On Friday, the National Association of Realtors (NAR) agreed to a US$418 million settlement to resolve all claims against the group by home sellers’ for artificially inflating real estate commissions. This agreement is still subject to court approval.

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Garth Myers, a partner at Kalloghlian Myers LLP, the firm behind the Canadian commission lawsuits against CREA and local real estate boards, believes this development could strengthen Canadian home sellers’ case.

“Along with agreeing to compensate sellers, NAR’s agreement to put in place a new rule prohibiting offers of broker compensation on the MLS shows that this requirement was never necessary in the first place,” Myers said in an email. “This will no doubt help Canadian home sellers in proving that equivalent rules in Canada are an illegal form of control on buyer brokerage commissions.”

According to the U.S. settlement terms, NAR is barred from creating rules that would permit a seller’s agent to determine compensation for a buyer’s agent. The agreement also requires the removal of fields on MLS that display broker compensation and prohibits the mandate for agents to subscribe to MLS in order to offer or accept compensation.

U.S. home sales commissions have typically been in the five-to-six per cent range, with both sides paid by home seller.

In April 2019, a federal jury in Missouri determined that the NAR and several major real estate brokerages had conspired to mandate that home sellers pay commissions to buyers’ agents, a violation of federal antitrust law.

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In April 2021, Kalloghlian Myers LLP filed a lawsuit on behalf of Toronto resident Mark Sunderland and anyone who sold a home in the Greater Toronto Area (GTA) since 2010, alleging misconduct by several of the nation’s leading brokerages, the Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB). TRREB was later dropped from the case.

Five months later, the Canadian Federal Court gave the green light for the class-action lawsuit to proceed.

In January 2024, the same legal team filed an additional statement of claim alleging that real estate brokerages across the country were involved in illicit practices, resulting in unjustifiable increases in residential real estate commissions.

The Canadian lawsuits are seeking compensation and regulatory changes regarding commission payments.

According to the Associated Press, the original payout in the U.S. class action was US$1.8 billion. However, in exchange for reducing the damages, NAR relinquished its right to appeal.

The commission rule changes are scheduled to take effect in mid-July.

• Email: shcampbell@postmedia.com

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