What You Need to Know About the New Standard Operating Procedures (SOPs)

Brian Levine | April 11, 2022

Brian Levine, Esq., HGAR In-House Counsel/Director of Legal Services & Professional Standards Administrator

There are a lot of questions and concerns from our members relating to the newly instituted Standard Operating Procedures (SOPs). This month’s article can serve as a “cheat sheet” on the basics and, hopefully, will answer many of your questions.

NYSAR’s SOPs template can be found here.

• The new SOPs requirement is effective April 20, 2022. Brokers must have their SOPs in place and posted digitally by then or be subject to DOS discipline.

• All brokerages, regardless of their business (commercial, leasing, residential, property management) must establish SOPs and comply with the law, even if they do not perform any residential sales business.

• NYSAR is awaiting clarity as to what types of residential properties are covered under the SOPs law. They will supply further information when they hear from the DOS.

• SOPs do not apply to homeowners/listing agents. SOPs do not apply to open houses or showings. Reminder: restrictions on open houses or showing must be established by the homeowner and be in writing.

• The law applies only to prospective homebuyers only (not renters).

• SOPs must be applied to all prospective homebuyers, regardless of agency. This means that it applies to clients and customers equally, as well as any form of dual agency.

• The three provisions set forth in the law are:
(1) whether prospective clients shall show identification;
(2) whether an exclusive broker agreement is required; and
(3) whether pre-approval for a mortgage loan is required.

• There is no acknowledgment form that needs to be executed.

• There is no copying requirement for any document produced (Exception: exclusive broker agreements need to be in writing, provided to the client, and retained in accordance with state laws and the Code of Ethics).

• Brokers are not required to demand these things; they only need to let the purchaser know whether they do or do not require any of them.

• It is up to the brokerage to decide what it will/will not require. For example, a broker could have the following notice: “Please be advised that prior to working with a prospective buyer: (1) we do not require identification from a prospective purchaser; (2) we do not require a purchaser to sign an exclusive brokerage agreement; and (3) we do not require a pre-approval for a mortgage loan.”

• Once requirements are established by the broker, all agents/teams must follow those requirements. For example: If the broker requires pre-approvals, all agents/teams must obtain pre-approvals.

NYSAR Opinion: A brokerage may decide not to require a provision but allow its agents to offer or request it as an alternative. However, if a broker permits agents to do this, all licensees must offer or request it, as such rule is established by the broker, not the licensee. (Note: If a homebuyer refuses to provide or accept the offer presented, the licensee cannot refuse to work with the homebuyer). NYSAR recommends brokerages establish a “script” or format for this situation.

• A prospective homebuyer may refuse to supply or comply with the SOPs. In that situation, the licensee may continue to work with the prospective homebuyer. However, all licensees must act similarly in this situation. NYSAR recommends brokerages establish a “script” or format for this situation.

• Brokers may provide services to a prospective homebuyer prior to receiving one or more of the required items, so long as they are ultimately received (or the homebuyer refuses). However, all licensees must act similarly in this situation. While not required to be placed in the SOPs, a broker may establish “when” something is required. For example, a broker may establish that pre-approvals are required prior to submitting an offer. NYSAR recommends brokerages establish a “script” or format for this situation.

• Not all interactions are the same. For instance, a walk-in that wants to view properties may not have an item required under the SOPs if they want to view a property that day. It is permissible that the walk-in provides the required item at a later time, so long as the brokerage establishes a “script” or format for such situations and this procedure is followed similarly by all licensees for each scenario. Using the fact pattern above, if a walk-in will provide the required item at a later time, there should be some time frame established such as “before the next showing” or “within X days.”

• Situations may arise where a homeowner’s or another broker’s requirements may contradict a broker’s requirements. For example: A Broker may not require preapprovals, but the seller may. Best practice would be to explain such scenarios in advance to prospective buyers that the broker may be obligated to follow the instructions of the seller or another broker, even if it’s contrary to their own requirements.

• Real estate brokers must maintain a date stamped, notarized copy of SOPs at all office locations and provide a copy upon request.

• Real estate brokers/agents/teams must post the SOPs or a link on any public websites and mobile apps. Best practice would be that the post be “Clear and Conspicuous.” The posting does not have to be the actual document, it can just be the SOPs’ language.

• Digital postings should follow the same procedure as other types of posts (i.e., Fair Housing). “All websites created and maintained…shall prominently and conspicuously display” a link to the SOPs. The DOS has determined that social media accounts constitute a website and the licensee should provide the link on the social media homepage. If there is only space for one link, a link to the licensee’s website or Broker’s website may be used so long as the website contains a link to the SOPs prominently and conspicuously. If the licensee is unable to provide the link on the social media account homepage, they can provide it as the first pinned post or include it in every post.

• Any alterations to SOPs must be date stamped and notarized within 30 days.

• All versions of the SOPs must be kept indefinitely.

• SOPs are not required for rentals, but brokers should consider a similar policy for prospective tenants to minimize potential liability if there is claim of a Fair Housing violation.

• Please be reminded: The DOS may amend or provide further regulatory guidance on the SOP law.

• NYSAR and HGAR both strongly encourage you to speak to your own legal counsel and marketing departments as to the best way to implement these suggestions.

• Additional questions can be directed to the NYSAR Legal Hotline at 518-436-9727.

Brian Levine
Brian S. Levine, Esq. is In-House Counsel/Director of Legal Services & Professional Standards Administrator for the Hudson Gateway Association of Realtors.