Free
Speech Victory for Real Estate Websites:
Federal Court Rules Websites Don’t Need Real Estate
Broker’s License
April 1, 2008
Arlington, Va.—In a legal victory for online free
speech, Magistrate Judge James R. Muirhead of the U.S.
District Court for the District of New Hampshire ruled
yesterday that real estate advertising company ZeroBrokerFees.com
may do business online without having to first secure
a real estate broker’s license. The court ruled
that websites that advertise properties for sale are like
newspaper classified advertising and thus do not need
a broker’s license under New Hampshire law. As a
result, held the Court, ZeroBrokerFees.com is entitled
to an injunction preventing the state from enforcing the
licensing requirement against it.
“This ruling gives ZeroBrokerFees.com exactly what
they have always wanted—the ability to do business
in New Hampshire free of the threat of prosecution,”
said Valerie Bayham, a staff attorney with the Institute
for Justice, which represents ZeroBrokerFees.com (ZBF).
IJ filed the case in June 2006 and secured a federal ruling
striking down a similar law in California in 2004. Bayham
said, “Now home sellers, not the real estate establishment,
will determine how best to advertise and sell homes in
New Hampshire.”
Ed Williams and Frank Mackay-Smith started ZeroBrokerFees.com,
based in Ipswitch, Mass., after recognizing the power
of the Internet to transform real estate transactions.
Using the Internet to distribute real estate listings
to a large audience, ZeroBrokerFees.com provides consumers
maximum choice and flexibility in selling or buying their
home without paying high broker commissions.
But New Hampshire state law required Internet advertising
companies to become licensed real estate brokers in order
to provide, in essence, an online classified ad service.
Obtaining a broker’s license takes thousands of
hours of training, a significant time and financial burden.
Meanwhile, newspapers and other publications of “general
circulation” are exempt from the licensing requirements.
In his 33-page decision, Judge Muirhead first rejected
the state’s argument that ZBF faced no real threat
of prosecution: “It is undisputed that plaintiff
engages in a course of conduct that is protected by the
First Amendment and perceives sufficient threat of prosecution
to have chilled its interest in pursuing its business
in New Hampshire.” The Court declined to rule on
ZBF’s First Amendment challenge, however, deciding
instead to interpret the licensing law to exempt ZBF from
the licensing requirement along with newspapers. Finding
that ZBF is a “web-based publisher of real estate
advertising and information,” the Court concluded
that “[t]here is no logical distinction between
[a newspaper classified advertising service] and plaintiff’s
business, and I will not construe the exemption [for newspapers]
to reach the absurd result of exempting one form of classified
advertising but not another.”
“We are delighted that the Court recognized both
the threat of prosecution we faced under this law and
the simple fact that web-based real estate sites are no
more ‘brokers’ than newspapers,” said
ZBF Chief Executive Officer and Publisher Ed Williams.
“If the state had simply made this clear from the
beginning, we could have avoided a lawsuit and focused
instead on running our business.” Added ZBF Chief
Financial Officer Frank Mackay-Smith, “We hope this
ruling clears the way for businesses like ours to operate
in other states without the hassles and threats of prosecution
from pointless regulations.”
“The Internet has revolutionized our entire economy,
including home buying and selling, allowing consumers
to save thousands of dollars,” said Steve Simpson,
IJ senior attorney. “But Americans will realize
these benefits only if the government recognizes that
its job is to promote the free flow of information, not
to protect the status quo.”
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