First-Round Victory for Real Estate Websites

John Kramer
John Kramer · March 14, 2007

Arlington, Va.—Online real estate advertising company won a first-round victory today in its First Amendment challenge to New Hampshire’s anti-competitive real estate licensing scheme. Magistrate Judge James R. Muirhead of the U.S. District Court for the District of New Hampshire denied the New Hampshire Real Estate Commission’s motion to dismiss the challenge and agreed that the First Amendment issues at stake require a fuller hearing by the courts. The ruling was signed yesterday and released publicly today.

“With this ruling, a federal court—rather than politically connected real estate agents—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 represents IJ filed the case in June 2006 and secured a federal ruling striking down a similar law in California in 2004.

Ed Williams and Frank Mackay-Smith started, 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, 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’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 freedoms 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.”

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 Chip Mellor, IJ’s president and general counsel. “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.”