Recent Disasters create opportunity for Price Gouging: Our View

California Bureau of Real Estate issues alert about Price Gouging - Important Ethics Reminder for all Licensees

Ed Note: The CalBRE issued the following alert which we are re-posting in order to help all licensees identify key regulatory (and frankly, morale) issues related to pricing after emergencies and natural disasters.  Please remember that the clients and customers coming to you for help in these situations need your help and you are charged with assisting them without price gouging.  Further, REALTORS® will want to consider how the Code of Ethics plays into these situations and we would argue that the Preamble of the Code dictates how we should react in these situations:

From the Preable to the NAR Code of Ethics - (online here):

(REALTORS®) identify and take steps, through enforcement of this Code of Ethics and by assisting appropriate regulatory bodies, to eliminate practices which may damage the public or which might discredit or bring dishonor to the real estate profession.  REALTORS® having direct personal knowledge of conduct that may violate the Code of Ethics involving misappropriation of client or customer funds or property, willful discrimination, or fraud resulting in substantial economic harm, bring such matters to the attention of the appropriate Board or Association of REALTORS®. (Amended 1/00)

We believe that while the law in many states will create legal and regulatory requirements and framework, it is still incumbent upon all licensees and REALTORS® to report violations to their boards, and to regulators.  The text of the CalBRE alert is below:

Alert to Real Estate Licensees and Others Who Lease or Rent, or Offer to Lease or
Rent, Residential Real Property in the Fire-Ravaged Counties of California Where
a state of emergency Has Been Declared:

The Critical Importance of Not Taking Unfair Advantage of Consumers, and Knowing -- and
the Pitfalls of Failing to Strictly Follow -- the Laws Pertaining to “Price Gouging”

By Wayne Bell, California Real Estate Commissioner

This Alert has been written because the California Bureau of Real Estate (“CalBRE”) has been informed
that one or more real estate licensees may be involved in unlawful “price gouging” (with respect to the
rental of residential real property) in one or more counties devastated by the recent fires and where a
state of emergency has been proclaimed.

California law provides, in section 396 of the California Penal Code, that upon and after the declaration
of a state of emergency (including one resulting from fire), those persons who rent or lease, or offer to
rent or lease, rental housing [for a term of less than one year] at a rate more than 10 percent above the
rate immediately prior to the onset of the state of emergency, are committing a misdemeanor and
engaged in an “unlawful business practice”.

Violations of the law are punishable by imprisonment or a fine of not more than $10,000, or by both
that fine and imprisonment.

“Unlawful business practice” actions can also be brought against those who violate the anti-price
gouging law, under section 17200 of the California Business and Professions Code.
CalBRE will also carefully investigate claims in connection with price gouging by its licensees and take
appropriate disciplinary action.

The people who have suffered losses due to the horrific fires should never have to suffer further from
price gouging. In exercising its disciplinary functions, and in enforcing the Real Estate Law with respect
to residential rental services in the State of California, CalBRE will continue to make protection of the
public its highest priority.

(Issued on October 16, 2017)

Written and Published by: VanEd

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