Friday, June 8, 2007

Kansas City Premier Apartments v. Missouri Real Estate Commission

As first reported by columnist Dan Margolies of the Kansas City Star on May 21, 2007, Kansas City Premier Apartments, Inc. (“KCPA”) filed a Petition in the 6th Judicial Circuit (Platte County) of Missouri on April 16 against the Missouri Real Estate Commission (“MREC”) and its five commissioners. Why? Well, first it was ForSaleByOwner.com. Then ZeroBrokerFees.com. Now it's KCPremierApts.com that is being told that, unlike newspapers circulating throughout the state, it must first obtain a brokerage license to advertise properties online.

KCPA operates an Internet website that “provides information content about current apartment, loft and house rentals” in the Kansas City metropolitan area. The company “contracts with local rental proprietors to advertise information about available apartment, loft and house rentals on the KCPA website . . . [t]he rental information shown on the KCPA website about available rentals units is provided by [the] rental proprietors.” The resulting database compiled by KCPA “is searchable by the general public at no cost.” It is my impression that KCPA, understandably, has never held a real estate brokerage license.

KCPA’s compensation system is just as innovative as its online display of rentals. “[F]ees are only payable by a proprietor at the time an individual who used the KCPA website search portal to find a potential rental property, then contacts the proprietor and voluntarily communicates that his/her interest arose after using the KCPA website, then signs a lease or rental agreement and then actually moves-in. At this juncture an agreed to advertising fee as set forth in the advertising contract is owed to KCPA.”

But too innovative, apparently, for the MREC. KCPA has received two cease and desist letters to discontinue its service. The latter of the two, dated March 22, 2007, was sent by counsel for the Missouri Department of Economic Development, Division of Professional Registration, on behalf of the MREC. The letter makes no mention of any investigation other than MREC’s review of KCPA’s website, and commands KCPA to “immediately cease and desist from operating as a real estate broker or salesperson in the state of Missouri without the required Missouri real estate license.” For good measure, counsel adds that “operating as a real estate broker or salesperson without a license is a criminal offense . . . [f]ailure to abide by this request will result in this matter being officially directed to the Missouri Attorney General’s Office and all applicable prosecuting authorities for official immediate legal action against [KCPA].” (emphasis in original). Counsel advises that the applicable real estate brokerage law “is valid and must be enforced by the Commission.”

Seeking guidance, KCPA filed suit, asking the Court to render declaratory judgments relating to MREC’s alleged violations of applicable statutory exemptions, due process, free speech, equal protection, and procedural failings. Defendants were granted an extension to file their Answer on or before today, June 8th, and a preliminary hearing is scheduled for July 16, 2007.

I hope to follow this case closely. We know what happened in California, and my previous posts suggest how the New Hampshire case is going to be resolved. While I am not familiar with the Missouri statute at issue here, and have not seen the defendants' responsive pleading, this case would appear to present another strong basis for invalidating the subject statute on First Amendment grounds.

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