Federal
Court Orders New Hampshire Real Estate Commission to Stand
Trial For Restrictions On Advertising Websites
Arlington, Va.— Magistrate
Judge James R. Muirhead of the U.S. District Court for the
District of New Hampshire—in a decision issued yesterday
[March 13, 2007] but publicly released today—denied
the New Hampshire Real Estate Commission ‘s efforts
to avoid a constitutional challenge to the state’s
real estate broker licensing scheme.
With the assistance of the Institute for
Justice, online real estate advertising company ZeroBrokerFees.com
filed a federal lawsuit challenging the licensing requirements
on June 13, 2006. The Commission filed a motion to dismiss
on procedural grounds on July 10, 1996; Judge Muirhead’s
decision denies that motion and allows the case to move
forward.
Ed Williams and Frank Mackay-Smith started
ZeroBrokerFees.com—a Beverly, Mass.-based company—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 under current State law, Internet
advertising companies must 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
that jeopardizes ZeroBrokersFees.com’s ability to
remain in business. Meanwhile, newspapers and other publications
of “general circulation” are exempt from the
licensing requirements.
In his 28-page decision, Judge Muirhead
found these laws sufficiently chill First Amendment to warrant
a fuller hearing, noting “the defendants have not
at any time indicated that they do not intend to prosecute
ZBF or bring action against ZBF in the future, or that they
agree that REPA [the Real Estate Practice Act] is unconstitutional,
or that ZBF’s activities do not violate the prohibitions
of REPA, but instead have stated that they feel it is necessary
to keep their options available to them.”
“With this ruling, a federal court—rather
than politically connected realtors—will determine
whether home sellers have a right to determine how best
to advertise and sell their homes,” said Valerie Bayham,
a staff attorney with the Institute for Justice, which is
representing ZeroBrokerFees.com pro bono.
The real estate broker licensing laws
are enforced by the New Hampshire Real Estate Commission.
Three of the Commission’s five members are also members
of the New Hampshire Association of Realtors—an industry
trade group that represents real estate agents.
“The Internet is revolutionizing
home buying and selling, allowing consumers to save thousands
of dollars,” said Bayham. “We don’t restrict
the free flow of information about medicine to only doctors
and we don’t let only politicians talk about politics.
Real estate agents shouldn’t have a monopoly on providing
information about real estate markets.”
Over the past decade, homebuyers have
embraced online efficiencies. In 1995, only two percent
of homebuyers used the Internet during their home search;
a mere 10 years later, that number has ballooned to a whopping
77 percent. The Progressive Policy Institute, for example,
estimates that using information technology to its full
potential could cut the transaction costs of home buying
in half, saving home buyers nearly $40 billion a year.
With Judge Muirhead’s decision,
ZeroBrokerFees.com is free to present evidence in its case,
which contends that New Hampshire’s law is an unconstitutional
prior restraint on speech, improper content and media-based
discrimination and an invalid regulation of commercial speech.
Founded in 1991, The Institute for Justice
has successfully defended First Amendment rights nationwide
and is committed to reinforcing and expanding the U.S. Supreme
Court’s recognition that “the free flow of commercial
information is indispensable” to a free society. Among
a number of victories for commercial speech, in 2004 IJ
freed online advertisers from complying with California’s
onerous real estate licensing regime.
The law firm of Douglas, Leonard &
Garvey, P.C. —based in Concord, N.H.—joins the
Institute in this case as local counsel.
| 
